I may have found something. I added -d to the rails script and it printed this:
Chloe@dumbopc /cygdrive/c/Sites/railsinstaller_demo $ rails -v Exception `LoadError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems.rb:1264 - cannot load such file -- rubygems/defaults/operating_system Exception `LoadError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems.rb:1273 - cannot load such file -- rubygems/defaults/ruby Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=rake version=0.9.2.2> Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=rake version=10.0.3> Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=json version=1.7.5> Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=json version=1.7.6> Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=rake version=0.9.2.2> Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=rake version=10.0.3> Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=json version=1.7.5> Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=json version=1.7.6> Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=rake version=0.9.2.2> Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=rake version=10.0.3> Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=json version=1.7.5> Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=json version=1.7.6> Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=rake version=0.9.2.2> Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=rake version=10.0.3> Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=json version=1.7.5> Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=json version=1.7.6> Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=rake version=0.9.2.2> Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=rake version=10.0.3> Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=json version=1.7.5> Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=json version=1.7.6> Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=rake version=0.9.2.2> Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=rake version=10.0.3> Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=json version=1.7.5> Exception `NoMethodError' at /usr/lib/ruby/site_ruby/1.9.1/rubygems/specification.rb:1495 - undefined method `to_ary' for #<Gem::Specification name=json version=1.7.6> /usr/lib/ruby/site_ruby/1.9.1/rubygems/requirement.rb:118: stack level too deep (SystemStackError) Chloe@dumbopc /cygdrive/c/Sites/railsinstaller_demo $ head -1 /usr/bin/rails #!/usr/bin/ruby.exe -d -- Problem reports: http://cygwin.com/problems.html FAQ: http://cygwin.com/faq/ Documentation: http://cygwin.com/docs.html Unsubscribe info: http://cygwin.com/ml/#unsubscribe-simple