I think kyl summed up. But I decided that I would let you know exactly what I used with rails beta4 (and now with RC). This setup worked well for me:
Rackspace Cloud Servers - Gives you full control of the server. You can resize your servers on the fly. You can also take snapshots if you want to duplicate settings for another site. Its cheap and, in my opinion, better than the Amazon cloud.
CentOS 5.4 is solid, but as kyl said, probably any distribution will work fine.
Ruby 1.9.2RC 2 - No problem so far on Rails 3 for me. Will definitely use Ruby Enterprise when they port it to 1.9.2 (not sure if this works, though?)
Nginx is fast and easy. I like it a lot better than Apache. It works well in front of the Passenger, the palace and the subtle.
MySQL is a personal preference. I have been using it for many years. Easy to configure master / slave or master / master configuration if you need to scale. Some people are successful just using sqlite, but I prefer something more robust.
Github is my source control. Bundler works great with github
Application server I am still discussing what to do about it. I was pleased with Passenger 2.2.15 until I saw how long it took to create new ruby โโprocesses to handle concurrency. It takes up to 30 seconds to create a new process for me, and the application is blocked, so no requests can go through while it spawns. Iโm investigating right now if this is my application or Rails 3, which takes so long to load. However, this problem has been fixed with Passenger 3. Hopefully this will be released soon. As a result of this, I'm probably going to use Thin or Mongrel until Passenger 3 comes out.
Capistrano - Works great for Rails 3. I would recommend finding some cap recipes for the version of your application with git tags ... or just write your own.
Anything else? Not related to the server, but I would recommend using the new plugin API for any part of your application that can be reused. Read about rails and engines. Its easy to create a gem with Jeweler and version it with github using the task of a rake jeweler. You can then expand the github tag or the wizard by adding the gem and github source to your Gemfile and package, installing or updating it. I recently ported all of my common application code (blog, authentication, etc.) to Rails 3, and it works great. And anytime I need to reuse this code, I just drop it into a new Gemfile application.