Gemsonrails crapping out during installation

I get the following error on installation:

gem install gemsonrails
Successfully installed gemsonrails-0.4.3
ERROR: While executing gem ... (Errno::ENOENT)
    No such file or directory - getcwd

After it says it is installed via gem list --local but if I try to
freeze a gem, I get the following:

rake gems:freeze GEM=activemerchant
/Applications/Locomotive2/Bundles/standardRailsJan2007.locobundle/i386/
lib/ruby/gems/1.8/gems/rake-0.7.1/lib/rake.rb:1652:in `pwd': No such
file or directory - getcwd (Errno::ENOENT)
        from /Applications/Locomotive2/Bundles/
standardRailsJan2007.locobundle/i386/lib/ruby/gems/1.8/gems/rake-0.7.1/
lib/rake.rb:1652:in `initialize'
        from /Applications/Locomotive2/Bundles/
standardRailsJan2007.locobundle/i386/lib/ruby/gems/1.8/gems/rake-0.7.1/
lib/rake.rb:248:in `new'
        from /Applications/Locomotive2/Bundles/
standardRailsJan2007.locobundle/i386/lib/ruby/gems/1.8/gems/rake-0.7.1/
lib/rake.rb:248:in `application'
        from /Applications/Locomotive2/Bundles/
standardRailsJan2007.locobundle/i386/lib/ruby/gems/1.8/gems/rake-0.7.1/
bin/rake:7
        from /Applications/Locomotive2/Bundles/
standardRailsJan2007.locobundle/i386/bin/rake:16:in `load'
        from /Applications/Locomotive2/Bundles/
standardRailsJan2007.locobundle/i386/bin/rake:16