I've used Paperclip in production. It's good and does what it's supposed to. The main issue is if you have a lot of different image sizes. It will basically process all of the images inline + store them to s3, etc. My ideal flow for image processing is to create the thumbnail (which the user sees right away) and to throw the rest of the image processing work on a background queue.
This minimizes the time spent processing a request and keeps the front-end snappy.