A little exploration shows that 2.1.2 generates a single extremely large method with a lot of branches and a lot of useless code. Rails 2.3 appears to generate a tree of methods, or graph-walking code. So the giant routing method appears to be mostly a 2.1.2 artifact.
As for the error, I suspect it does not affect production; if you're running on a reasonably recent JRuby, all errors from jitting should be caught and as a result the method just stays interpreted. Interpreted mode for this giant method isn't great but it won't affect the behavior of the application. It's possible that some logging somewhere has caused this error to be displayed for you.
I'll look into JRuby 1.3.1 code to see if perhaps we were logging unnecessarily, or else not capturing the error.