I had same problem and I found out that it worked fine with source code version (1.99.2) of the web2py. That's why with compiled version (1.99.2) I copied the gluon directory from the library.zip to root and that solved the problem.
I'm new to web2py so could somebody explain what is the actual reason for this behaviour ? In the documentation there was no mention that I need to unzip the library.zip ?
