When hosting multiple Rails applications using the new mod_rails for Apache, all of the RAILS_ENV variables will default to 'production'.
The way you can change what environment your Rails applications run in is by adding/modifying the following line in your httpd.conf:
RailsEnv staging
This is really the only inconvenience that I've found so far with mod_rails. Surely someone will allow for the RailsEnv variable to be located inside a VirtualHost block.