Exact problem as chris, pentor and Vince – it was driving me crazy. Deleting the cache did not help – the gem magically reappears each time.
I managed to install ActiveSupport 2.1.0 by downloading from its rubyforge project page manually and installing locally, and then “gem install rails” goes through just fine. Looks like a bad repository version to me.
Was upgrading from Rails 1.2.3 on Vista, using RubyGems 1.2.