OS X, textmate, homebrew, ruby on rails, rspec, git for development
Ubuntu, vim, nginx, passenger, thin, postgresql, for production
I use a VPS from linode.com for production sites, which ive been very happy with.
in my experience, a good amount of desktop real estate has been useful to me. I like to have open at the very least a browser, a text editor, and a terminal for tailing logs / rails console / running tasks / code generation without having to switch between foreground, background windows all the time.
So I use a large format monitor like the 27" Cinema Display as my primary monitor, in addition to a secondary monitor that i swivel between portrait and landscape orientation.
The quality of the keyboard is huge for me. I use a Happy Hacking Professional 2, which ran me ~$300. And while i realize it may seem crazy to spend that much on a keyboard, honestly every second i spend typing on this keyboard is like a tiny gift. And i spend A LOT of time typing, so imo this was one of the best decisions ive ever made.