I finally got it all working.
jdk6u18 really doesn't play well with jruby and/or glassfish v3. when I downgraded to jdk6u17 everything started working as expected.
I have no clue what could be the problem with u18 or how to debug it.
What do you suggest I do besides posting a bug report for jdk with description "jdk 6u18 breaks jruby on rails applications deployed on glassfish v3"?
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