The biggest challenge I've found is that Rails is going to be loading each item one by one, depending on how you approach it. So like the Blah.all does SELECT * FROM blah. But then the .each do does a second SELECT * FROM blah WHERE id = ... for each of them.
ps- I may be incorrect on the exact SQL translation, but the general effects of using iterators with ActiveRecord is that it makes a LOT of DB requests. You can see this if you turn on SQL debugging.