Ok, Ruby seems to be ok, but for some reason it doesn't ask what sqlite gem to use and goes trying to build the latest one. So, please check if this works:

http://domhackers.blogspot.com/2008/...n-windows.html

Try right clicking on the windows_setup script, choose edit and change the gem install line to:

gem install win32-open3 sqlite3-ruby --version=1.2.2

Is this Vista btw? In xp it asked what gem to use.