It isn't quite as simple as that. After idling some time, it will release memory that Mongrel wouldn't release. There are many topics about the exact details. Future versions will feature more memory optimizations.
"Inserting a big chunk of C++ into my Apache listeners doesn't give me warm fuzzy feelings."
Uhm, what language do you think all the Apache modules (mod_rewrite, mod_perl, mod_php, etc.) are written in? They're all either C or C++, so by your logic all of Apache won't give you warm fuzzy feelings.
"Neither does the fact that mod_rails just flat-out doesn't work on OS X,"
This is false. Passenger does work on OS X, but because of an issue in the default Apache installation provided by OS X, Passenger is unable to work. If one installs Apache via MacPorts (or some other means) then Passenger will work just fine. In fact, the installer warns the user about exactly this issue.
Many, many people have tested Passenger on OS X, and it works fine for them. Ryan Bates of Railscasts, the one who made the screencast, used OS X. Pratik Naik, a Ruby on Rails core developer who helped with testing Passenger, used OS X.
We can assure you that this is for real. We at Phusion have been working at this for quite some time now, and several of our beta testers include Rails core team members, as well as some of the largest RoR hosts on this planet ;-). And so far, the feedback has been overwhelmingly positive and we can't wait to share this with you guys. We do ask for your patience though, albeit for just a little longer.
Regarding documentation, we think you'll be more than pleased to see that we've gone the extra mile on this part. If anything, we hate bad documentation as well, so we really intended on tackling this with Passenger ;-). For more information regarding Passenger, be sure to keep a close eye out on http://phusion.nl, http://www.modrails.com, http://izumi.plan99.net/blog and http://ninh.nl as we'll be posting more about it the following few days/weeks.