Or should I be using a totally different server?
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632answers:
2Nginx with mod_wsgi requires the use of a non-blocking asynchronous framework and setup and isn't likely to work out of box with Pylons.
I usually go with the proxy route to a stand-alone Pylons process using the PasteScript#cherrypy WSGI server (as its higher performing than the Paste#http one, though it won't recycle threads if you have leaks...).
If you're set on using Apache and its your server (so you can compile and run Apache mod_wsgi), I'd suggest using that setup as its less maintenance to effectively utilize multiple cores. With a proxy setup, you'd have to use the mod_proxy_balancer with multiple paste processes to effectively utilize multiple cores/cpus.
If you're deploying to someone else's Apache (shared hosting), mod_proxy is generally the easier solution as its stock in Apache 2.2 and above.
Personally, I usually deploy with nginx + proxy to multiple paster processes.
I've also used mod_fastcgi + flup to great success several times now. There are a couple of recipes floating around for setting this up, but unfortunately it will probably still require some tweaking on your part to get everything working: