Alrighty, this one took me a while, mostly figuring out the permissions.
First, I followed this tutorial for installing Passenger onto Apache. The installer tells you "all you need to do is add this tiny snipped (the bit that imports the Apache module). This isn't true.
You actually have to set up a virtual host for the rails application. I set it up on caleb.techhounds.com. Note: if you make a VirtualHost for a subdomain, you need to also create a VirtualHost for the main web server! I'm not sure if you can set up multiple VirtualHosts on the same domain.
This tutorial gives you the full config you need, as does this one.