I've been developing rails in windows for three years and the performance has been fine actually. My setup is relatively powerful: Dual Core 3.0 GHz, 3 gigs of ram, and it outperforms my coworker's new macbook pros by 20-30%. (When running 1200 integration tests).
That said, I have has ruby crash randomly after moving to 1.9 so I would definitely not recommend running any production server using MRI on windows.
You should strongly consider switching to JRuby if you are going to host your site on windows. Many production rails applications run on JRuby, and it's performance great and does not vary much between platforms. Here's a list of some sites running JRuby: http://kenai.com/projects/jruby/pages/SuccessStories, and the home page for it is: http://jruby.org/
Another option for local development (that I have used on occasion) is to run Rails inside of a CentOS VMWare instance. Though my experience has been that the performance has been about the same or slightly slower, in that environment. You may see a benefit if you run rails in a multithreaded state (instead of just launching script/server).
Good luck!