Hope i get your attention before running "gem update --system" on win32, as the 0.9.5 version of rubygems caused me some problems
I have done what I could to gather the information and write what worked for me:
Rails 2.0, gem install, Windows => Mongrel Trouble http://justaddwater.dk/2007/12/09/rails-20-gem-install-windows-mongrel-trouble/
Please spread the word for windows users 
/Jesper Rønn-Jensen