Somewhere I did something silly.
I was deploying my Rails app via cloning the Mercurial repo down onto my Ubuntu server. It worked the first time, and then…well, I made a small change on my dev machine, pushed the changes to the repo, and then deleted the copy on the Ubuntu server and re-cloned from the repo.
The clone operation (the second, and third, and ‘n’ times) works without error, but I don’t have write access to the files that were cloned.
When I try to startup my mongrel – it can’t create the /tmp folder, and because of no write access, fails to start the Rails app.
Fixed through work around stated in comment above.