Alright, now its working kind of! After restarting the computer and 
using which rails i get the much more sensible looking path * 
/usr/local/bin/rails *
running wc -l `which path` I get * 19 /usr/local/bin/rails *

so now navigating above my home directory I am able to use rails new 
like so: * mwr@mwr-Ubuntu:/$ sudo rails new blah/here * and it seems to 
work.

now - i cant access my localhost, but thats a separate issue i think i 
can work out.

Thanks everyone for your help!

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