Yes, JRuby is reliable! Oracle uses JRuby for Oracle mix (http://mix.oracle.com/), Sun had used it for Kenai (http://kenai.com), and it's gonna be the next base for java.net (from kenai site: "Work is on-going for migrating the Java.net domain over to the Kenai infrastructure")!!
You can run almost every code, some gems uses native C extension and in JRuby there's a primitive support to it, but yes...rails just works.
You can deploy Rails apps in Application Servers like Tomcat or JBoss with Warbler that wraps Rails apps inside a .war file, it's pretty awesome!
update: you can see a lot of benchmarks here: http://programmingzen.com/2010/07/19/the-great-ruby-shootout-july-2010/