Building native extensions. This could take a while...
extconf.rb:1:in `require': no such file to load -- mkmf (LoadError)
ERROR: While executing gem ... (RuntimeError)
ERROR: Failed to build gem native extension.
Gem files will remain installed in /var/lib/gems/1.8/gems/fastthread-1.0 for inspection.
then you need the ruby development libraries and the build-essential package. I've found that these commands will make sure mongrel (and rails) is installed correctly:
$ sudo apt-get install ruby1.8-dev rubygems build-essential rails
$ sudo gem install mongrel --include-dependencies