I\'ve been writing a game for Facebook using Rails and jQuery. Since I started using the Facebook Javascript SDK, using localhost as an app domain seemed to work just fine.
You can still test your app without deploying it on a remote sever like heroku. The trick is to update the etc/hosts file this way:
etc/hosts
127.0.0.1 mydomain.com
Then on the Facebook App's settings, type [http://] mydomain.com, without the "[" and "]"
It worked for me this way