Ruby on Rails fails on Windows 7, report activate error

Question

I used the installer kit on http://www.railsinstaller.org/ and everything went fine. Then followed the instructions to setup a project in c:/sites and that worked. But now every time I run 'rails s' and then close it, rails completely stops working.

    Microsoft Windows [Version 6.1.7601]
Copyright (c) 2009 Microsoft Corporation.  All rights reserved.

c:\Sites\project>rails s
C:/Program Files (x86)/ruby-1.9.3/lib/ruby/site_ruby/1.9.1/rubygems.rb:926:in `r
eport_activate_error': Could not find RubyGem railties (>= 0) (Gem::LoadError)
        from C:/Program Files (x86)/ruby-1.9.3/lib/ruby/site_ruby/1.9.1/rubygems
.rb:244:in `activate_dep'
        from C:/Program Files (x86)/ruby-1.9.3/lib/ruby/site_ruby/1.9.1/rubygems
.rb:236:in `activate'
        from C:/Program Files (x86)/ruby-1.9.3/lib/ruby/site_ruby/1.9.1/rubygems
.rb:1307:in `gem'
        from C:/RailsInstaller/Ruby1.9.3/bin/rails:18:in `<main>'