I had some trouble for a while with this too. At first I thought the problem might be that Windows was associating the ".rjs" file with "RealSytem Skin", but I don't think it is. I fooled with it quite a bit, so I still don't know what it was (or what combination of things) that was the problem.
Does your app/views/layouts/application.html.erb file have the line
Code Ruby:
<%= javascript_include_tag :defaults %>
If you look at the view-source of a page do you see something like
HTML Code:
<script src="/javascripts/prototype.js?1202241846" type="text/javascript"></script>
<script src="/javascripts/effects.js?1202241846" type="text/javascript"></script>
<script src="/javascripts/dragdrop.js?1202241846" type="text/javascript"></script>
<script src="/javascripts/controls.js?1202241846" type="text/javascript"></script>
<script src="/javascripts/application.js?1202241846" type="text/javascript"></script>
What page are you up to?
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