Well I figured out the problem after a lot of debugging. Whew! In efforts to hopefully help others, here's what I found in my situation.
When using Plesk to host your website, you will need to make sure that you have all extensions needed available. In my case, I logged into SSH and installed my own version of Ruby, Rails, and Gem. The version of Plesk I was using was 10.0.1, but only came with older versions of Ruby and Rails.
One of the bigger issues I had really didn't have anything to do with my symbolic links or placements of my Ruby on Rails application. It was Plesk's way of setting up the virtual hosts and Apache's interpretation of Ruby on Rails. I installed the Passenger module for Apache which worked well. Everything was working perfectly in the Passenger Server environment, but I kept getting a 404 or 500 error.
Turns out, not only do you need to have the passenger files installed, but you also need to make some modifications to the vhosts files in this virtual environment.
Keep in mind that I am using Plesk 10.0.1 so the third line may vary depending on your version.
[user@domain]# nano /var/www/vhosts/domain.com/conf/vhost.conf
[user@domain]# nano /var/www/vhosts/domain.com/subdomains/blog/conf/vhost.conf
[user@domain]# /usr/local/psa/admin/sbin/httpdmng --reconfigure-domain domain.com
in the first vhost.conf file, I added a single line ---> RailsBaseURI /blog
in the second vhost.conf file, I added a single line ----> RailsBaseURI /
the first vhost file was pointing to the domain www.domain.com and the vhost file said to use Ruby for the www.domain.com/blog directory.
This blog directory is outside of the web root folder just under /var/www/vhosts/domain.com/blog where as the web root folder is under /var/www/vhosts/domain.com/httpdocs. The symbolic link worked perfectly. I did create them as sudo, but chown and chmod them to the correct user with permissions of 755. I did the same for the symbolic link.
Since I am using Plesk, the third line is to rewrite the configuration file for the domain.com. You will not need to do this again for the subdomain. Also, I reset apache /etc/init.d/httpd restart to make sure that Apache took the new configurations from Plesk.
Towards the end, I still got a few errors. Granted, I'm an idiot... I didn't create my blog_production database. Failsauce... I took me a while since I'm stubborn and didn't check the log files. I eventually did and bingo!
After creating the database. I didn't want to have to recreate the tables so I did
rake db:migrate RAILS_ENV=production
which copied out the tables in my app setup to the production database.
I do apologize if many of you found this information very elementary, but I was rather pleased with myself to have this part of the whole development process out of the way. Not only did I finally get it working but I have also concluded a few items.
1. Virtual Servers suck ass for trying to query more than 2 records. It took 3 seconds to query. Cheap goDaddy hosting works, but is cheap.
2. I learned a lot about Plesk's setup and can appreciate the hard work that has gone into their development.
3. I've learned a lot about Ruby, Rails, and Gem in the process that is very valuable. I feel that these past 4 hours of on/off work has helped me a great deal in the foundation of a new language.