Btw, the current, preferred way of getting pretty much all formulas is 
Homebrew <http://mxcl.github.com/homebrew/>. Clean, easy, simple. Also, I 
was gonna upvote the RVM recommendation until I realized...yeah...

try:
1. install RVM and don't use 
1.8.7<http://hugofrappier.wordpress.com/2010/01/01/rails-1-2-x-ruby-1-8-6-snow-leopard-the-missing-link/>.
 
Use 1.8.6.
2. make sure your RubyGems is working

cd /path/to/rails/app/dir
ruby script/server OR rails script/server

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