If I had to guess, they're running with the stock Ruby GC parameters, which are fairly horrible for a Rails app, and can result in multiple GC cycles per request. Ruby's GC is painfully slow, so if you're kicking into it, you're going to slaughter your response times.

REE and Ruby 1.9.3 both offer GC tuning parameters, which let you instruct Ruby that you're going to shove a huge app at it and to not garbage collect every time someone sneezes, which can have a pretty massive impact on response times.