Had the same issue with my really simple ROR app which works fine under instantRails on my Windows XP laptop. There was no .htaccess file in the public folder on the lunarpages server, which probably sets up some re-write rule to use the fastCGI. Once past that, the problem now is that it is unable to login to the database when it finds the right controller and view.
I have recreated the database from scratch, and created a single user with all privileges. Since it is a simple test app with a couple of tables and less than 10 records total, I did not need to do a db migrate or anything. In the config/database.yaml file I have tried various combinations but with no success. In a shared hosting situation there are few things only support can do. While it is not reasonable to ask support to help us with learning ROR, I think it is their job to make sure a really simple application works correctly in their shared environment. It should not take this long to get a simple application up and running.