Hiring Rails full-time Rails developers is hard. Surging demand. You will likely fight other companies for every recruit. Freelance consulting rates are going through the roof.

Don’t hire someone that doesn’t know Rails at all. Perhaps as with all things, you want to hire someone who has self-selected to do that job. Rails is famously easy to get started with you can literally be running your first Rails app minutes after visiting rubyonrails.org for the first time. I won’t hire anyone who hasn’t at least built and deployed a couple of projects in their spare time and who understands both the advantages and disadvantages of using the technology.

Look for open source contributions. Being intimate with the open source workings of the Rails community is crucial. Open Source contributions such as releasing a Rails plugin, or fixing bugs on projects like Beast, or Rails itself, demonstrates exposure to other Rails code bases.

A university degree is not important. I hate to say it-I’m personally a graduate from Canada’s highly-regarded Math/CS program at Waterloo-but several of the best Rails developers I know didn’t study computer science at all. Hire perpetually. You’ll find that I always have an open Rails developer position, because when demand outstrips supply, you should hire when you can.

If they are using Mephisto or Typo then they’ve been exposed to an established rails code base and have successfully deployed it and even customized it.
As my company does social media software, engaging in the blogosphere is good experience. How else can you really learn the nuances of FeedBurner and Technorati, etc., if you haven’t had a blog?
Lastly there’s the psychological effect of identifying yourself publicly as a Rails developer. That’s a commitment, and addresses my Tip #3 about finding candidates that have self-selected to do Rails.

Regarding holes in proficiency… web development is increasingly vertically integrated. In Java and .NET worlds, its quite customary to have front end, business tier, and DBAs all separated. The highly integrated Rails philosophy–convention over configuration, and all that–requires a top to bottom perspective. Rails is not that different from any other MVC framework. Anyone who has used Struts+Hibernate in the Java World can start working on Rails easily. I think working with Rails and being a good Ruby developer are different things. Finding a good Ruby developer is harder. A good Ruby developer with decipher the internals of the Rails implementation , understand the philosophy , and extend it, the average one will just follow the book.

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