I get the same issues with Instant Rails as I do with my other install.
I can build apps and do other things, and it all works. Only I cannot generate scaffolds or use rake. I get errors asking for ruby16-ming32.dll (or something like that). Same issue with both rails installs.
Ive installed rails on ubuntu linux and everything works fine, no problems. Seems like everyones rails packages are still missing some key files.
So its no help to me. But it is great for those that want to play with rails a little and dont want to install Apache, MySQL, Rails, and deal with all the other crap of configuring it all.
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Still, it's the closest I've got to actually having it installed :)
Thanks for the link.