Help figuring out problem with installing activesupport 2.2.2

I created a brand new RoR installation on Win XP using
InstantRails-2.0 which brought rails 2.0.2. I now struggle to update
it to rails 2.2.2. The essence of my problem comes to the installation
of activesupport 2.2.2. Below is the cut and pasted session
illustrating my problem and run-time environment. Can someone suggest
a course of actions? I am lost.

- LR

BTW. I already installed rubygems-update 1.3.1 and run
update_rubygems. It did not help.

Does that produce the same effect as

$ gem update --system



1. I can't see a difference between effects of "gem update --system"
and update_rubygems.
2. Trying to do install with verbose output produces

gem install activesupport --verbose --backtrace

GET 304 Not Modified:
Error fetching remote data: timed out (http://
Falling back to local-only install
ERROR: could not find gem activesupport locally or in a repository

Using my browser I can easily see and download
activesupport-2.2.2.gemspec.rz file from;
so I don't know why gem is timing out. Does anyone know where should I
place it locally so gem would be able to use it? Or should I do
something else with this rz file?

- LR