Perhaps something like the Affero GPL would have been more appropriate in that case? Maybe you have access to better legal advice than I do, but my reading of the GPL is that if you're not redistributing it, you're not required to give back your modifications, and I'm not sure that running mod_rails on your own servers counts as redistribution. Perhaps you're simply aiming to stop people from selling binary-only versions, but that doesn't seem like nearly as likely a scenario as some hosting provider boasting of a mod_rails with extra secret sauce that they're not sharing.

I'm not a license zealot, and think they all have their places, but I should also say a word or two in favor of the BSD/Apache style licenses: in the Apache Software Foundation, we don't rely on licenses to "keep people in line" (in terms of proprietary forks), but a strong, diverse community that has the potential to outdevelop anyone who tries to make a proprietary fork. They realize that if they fork, they're going to fall behind the community driven version, which is moving faster. Of course, that's not possible in all cases, but I think that a potentially important project like mod_rails certainly has a good shot at attracting that kind of community. You guys probably know more about the people in the rails hosting market than I do though, so maybe your fears are based on a concrete threat.