Any Ubuntu version would do. On a production server you should probably stick to LTS releases, which is 10.04 On a development machine you can use the latest release, which is 11.04 Also, on a dev machine it would be better to use RVM (https://rvm.beginrescueend.com/) to install and manage your ruby versions. It gives you tremendous flexibility on what Ruby and Rails versions you can use, and makes it trivial to discard any problematic ruby/rails installations you have had.
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