Ajax observe_field not vorking on Rails

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I am trying to create some kind of search in my ruby on rails
application and I want to add ajax support. I want when a user types in
a search box a word, ajax automatically generates the results. And I
have searched almost all internet and I couldn't find answer to
following question:

When I type into my text area nothing happens. It is like ajax is not
working at all. Tre problem is in observe_field which should observe my
id= 'query' but it seem like it not doing anything

I am using Prototype 1.6.1 and the newest version of rails. The code I
wrote is:

viewer:

    <form name="sform" action="" style="display:inline;">
<label for="item_name">Filter on Property No : </label>
<%= text_field_tag(:query, params['query'], :size => 10, :id => 'query'
) %>
</form>

<%= image_tag("/images/system/blue_small.gif",
              :align => "absmiddle",
              :border => 0,
              :id => "spinner",
              :style =>"display: none;" ) %>
</p>

<%= observe_field 'query', :frequency => 1,
         :update => 'table',
         :before => "$('#spinner').show()",
         :success => "$('#spinner').hide()",
         :url => {:action => 'list'},
         :with => 'query' %>

<div id="table">
<%= render :partial => "items_list" %>
</div>

And my controler is:

  def list

    sort = case params['sort']
           when "Title" then "title"
           when "address" then "address"
           when "close date" then "close_date"
           when "property_no_reverse" then "property_no DESC"
           when "address_reverse" then "address DESC"
           when "close_date_reverse" then "close_date DESC"
           end

    conditions = ["title LIKE ?", "%#{params[:query]}%"] unless
params[:query].nil?

    @total = Message.count(:conditions => conditions)
     @accounts = Message.paginate :page => params[:page], :per_page =>
10, :order => sort, :conditions => conditions
    if request.xml_http_request?
      render :partial => "items_list", :layout => false
    end

  end

I would greatly appreciate any help I can get!