You could check out lowendbox for cheap VPS. I had one for a year, only paid $50 for a 512MB Xen VPS. It ran a low volume rails site just fine. I did have to do

You could check out lowendbox for cheap VPS. I had one for a year, only paid $50 for a 512MB Xen VPS. It ran a low volume rails site just fine. I did have to do a trick with mysql, and that was to disable TCP in MySQL and only use the local socket (/tmp/mysql.sock). That reduces the memory footprint of mysqld significantly.