>"Have they solved the 'you need the whole blockchain' bit?"

Yes.

Ripple servers only need the current state of the ledger (as opposed to requiring the entire history of transactions, as Bitcoin does). This eliminates the problem of needing to download GBs of history to run a server. You can optionally download the full ledger history if you want access to the data, but it is not required for your server to participate in transaction processing. It's a much lighter weight design in general.