the short answer is yes 
The long answer:
Let's cover the basics.
* scalability has almost nothing to do with performance. Scalability is being able to add hardware and gain more throughput proportionaly to the hardware added.
* performance/speed is being able to do more on the same hardware.
In fact, Ruby is a dog performance wise. It is definetly slower then perl, python and php. Benchmarks vary from twise as slow to as much as 5 times slower. Where Ruby and in particular Ruby on Rails shine though is speed and easy of development. So if you need 'speed' choose something else, if your concern is 'time to market' RoR is a great choice.
Now when we done with 'speed' let's look at 'scalability'.
To be able to scale to MySpace's size you need to get to a point of 'linear scalability'. i.e. when to serve 2x users you need 2x hardware.
Since you can easily add more frontends (running RoR, php, python whatever), the usual bottleneck in scalability is indeed a database. But the good thing is that sites like MySpace, Blogger, LoveJournal are fairly easily partitioned. i.e. my profile can sit at database db13, and your profile can sit at db37 thus solving the db bottleneck.
Problems start when you have some data that needs to be centralized, or shared between users. (For example you do some DB joins with users table and some other table, then that other table can not be easily partitioned). The are many techniques t osolve this problem (duplicating data, doing joins in application lever etc), but they are not related to RoR at all. it's all just carefull system architecture design. not trivial, but doable.
For a good primer on scaling web sites read Building Scalable Web Sites by Cal Henderson (flickr).
Hope this helps
