Password Protecting Rails Configuration Passwords

There is about a year-old thread on the list on the topic of password
protecting the Rails database password (typically stored in the clear in
database.yml). A lot of people dismissed the idea, since any key to
decrypting the password would have to be stored on the same box.

I was wondering what people thoughts were on the
feasibility/desirability of passing argument to Capistrano deployment
tasks that would pass the decrypting key along to the application.

In many applications, the database password may not be the only
sensitive password on the box. After all, web servers might need to
interact with all kinds of different systems, each system requiring its
own authentication credentials. So even if you don’t think that the
MySQL password is all that sensitive, there is still the general issue
of leaving sensitive configuration details in plaintext (and embedded in
the code) on the server.

Any thoughts, help, comments would be appreciated.