I certainly wasn't anywhere in the loop, but at least on my site, FastCGI didn't work, and Mongrel did.
Zed's rant/flame goes into so much personal detail that he doesn't really articulate the point. Rails was receiving this enormous amount of hype, but there wasn't even a working application server yet.
No one cares how the sausage is made. They care that they have sausage. I write code to make money, not for uptime competitions. If something that makes money needs to be restarted every 4 minutes and customers are willing to pay for it why should I give a shit?
FCGI problems were very customer-visible. Prior to Zed coming along, the issue wasn't being discussed much anywhere, making it unclear if it was your code, ruby issue, framework issue, or appserver. Now it is your problem to fix!