Magically I found some time to work on my web server for Rails based on Http.sys. In the interest of having something definitely working, I went down the path of creating a basic CGI server. Given a virtual directory and a physical path to a Rails public folder, I can now successfully serve pages, with a few caveats.
One minor thing is that I've only tested a few pages in my first ever Rails app, so I'm sure there are things I've missed. I haven't attempted to support things like auth or https yet, but those should definitely be possible.
More importantly, I'm using HttpRuntime.ProcessRequest for serving static content, but I'm only using SimpleWorkerRequest at the moment. This means binary files as well as POSTs and things don't work. It looks like I'm going to have to subclass HttpWorkerRequest myself to make things work. I've looked at the Cassini source for how they do it (and to see if I could just use that), so this shouldn't be too bad. Not exactly fun though.
Once I get those things handled I'll move onto a pooled interpreter approach and leave the horrible performance of CGI behind. Seeing the Rails 'Welcome aboard' page served from my code was nice, even if the images didn't work yet. Soon.