There are no visas on arrival in Mongolia but there is a Mongolian consulate in the border town of Erlian.
There have been reports that the embassy in Beijing requires a LOI for the Mongolian visa. I don't recall any recent reports about the consulate in Erlian but it is better to be prepared with an email of confirmation of accommodations in Ulan Bator.
Consulate of Mongolia
Erlian Fang Dian, Room 307/308
Erlian Hot
P.R. of China
Tel: (+86-479) 7521538
Fax: (+86-479) 7522194
This post from summer 2007 by manulike with update from Nov 2008 has useful information: Erlian Fact Sheet.
Do report back your experience.
Ruth