So, it seems someone stepped up to the challenge and started working on ActiveHibernate from me initial idea. The code got pushed online a while back and I have finally had the time to look at it. Over all it looks really nice.
Of course, it's very early times. I've submitted some patches making the configuration aspect easier and more AcitveRecord like - but it's going to be important to have access to all the features of Hibernate too. When in the balance, I don't think we should aim for total ActiveRecord equivalence.
Read more here and find the Google Code project here.
I would encourage everyone interested in a merger between Rails and Hibernate to take a look at this. Now is the time to come with advice on how it should work, what it should do and how it should look like.