It seems to me they didn't really know what setup they were running if they are wondering what a 'mongrel' is.
I hope they weren't trying to serve the site on only a couple of mongrels.
My first thoughts,
Benchmark a bit, use a tool like fiveruns to find out what's really happening. I wonder what the real bottleneck is.
Of course they shouldn't use a shared database server, but I'm wondering if they are they using caching? What I'm reading about that site I think they could cache the hell out of it. I've only used the builtin Rails cache methods but a tool like memcached should help out on all the database requests.