<p>I believe that we can allow Firefox to sent NTLM data to SharePoint sites to do automatic authentication, and I think that this is doable with IIS.</p>

<p>I'd like to do the same thing with an internal Rails site.</p>

<p>Does anyone know of way that I could authenticate NTLM type user information through a Apache/mongrel setup (provided of course that it's already running on a Windows box inside of an Active Directory domain)?</p>

I'm assuming you've already worked out which HTTP headers you need to send in order to get firefox and IE to send back the NTLM authentication stuff, and are just needing to handle that on the server side?
You could use some of ruby's
win32 libraries
to access the underlying windows authentication functions which handle the NTLM.
I'd suggest the path of least resistance might be to see if there is a COM component which can do the authentication for you, and if so, to use it using the Win32OLE ruby library.
If there's no COM component, you might be able to find something in one of those other libraries which can invoke the native win32 methods for you.
If you can't find that, you'd have to write a ruby C extension. I've done this on linux, and extending ruby is pretty easy, but you may find the microsoft authentication API's a bit painful.
Hope that gets you started on the right track :-)