here's the stack trace I got when deploying a Rails 1.2.5 app to JBoss on Windows:
17:30:47,375 INFO Failed to load Rails: No such file or directory - C:/Java/jboss-4.2.1.GA/bin/C:
file:/C:/Java/jboss-4.2.1.GA/server/default/tmp/deploy/tmp40392ecard-server-exp.war/WEB-INF/lib/jruby-complete-1.0.1.jar!/pathname.rb:420:in `realpath_rec'
file:/C:/Java/jboss-4.2.1.GA/server/default/tmp/deploy/tmp40392ecard-server-exp.war/WEB-INF/lib/jruby-complete-1.0.1.jar!/pathname.rb:453:in `realpath'
C:/Java/jboss-4.2.1.GA/server/default/./tmp/deploy/tmp40392ecard-server-exp.war/WEB-INF/config/../vendor/rails/railties/lib/initializer.rb:543:in `set_root_path!'
C:/Java/jboss-4.2.1.GA/server/default/./tmp/deploy/tmp40392ecard-server-exp.war/WEB-INF/config/../vendor/rails/railties/lib/initializer.rb:509:in `initialize'
C:/Java/jboss-4.2.1.GA/server/default/./tmp/deploy/tmp40392ecard-server-exp.war/WEB-INF/config/boot.rb:38:in `new'
C:/Java/jboss-4.2.1.GA/server/default/./tmp/deploy/tmp40392ecard-server-exp.war/WEB-INF/config/boot.rb:38:in `run'
C:/Java/jboss-4.2.1.GA/server/default/./tmp/deploy/tmp40392ecard-server-exp.war/WEB-INF/config/boot.rb:38
file:/C:/Java/jboss-4.2.1.GA/server/default/tmp/deploy/tmp40392ecard-server-exp.war/WEB-INF/lib/jruby-complete-1.0.1.jar!/META-INF/jruby.home/lib/ruby/site_ruby/1.8/rubygems/custom_require.rb:27:in `require'
file:/C:/Java/jboss-4.2.1.GA/server/default/tmp/deploy/tmp40392ecard-server-exp.war/WEB-INF/lib/jruby-complete-1.0.1.jar!/META-INF/jruby.home/lib/ruby/site_ruby/1.8/rubygems/custom_require.rb:27:in `require'
C:/Java/jboss-4.2.1.GA/server/default/./tmp/deploy/tmp40392ecard-server-exp.war/WEB-INF/config/environment.rb:11
This does not happen with 1.2.3, and adding 'java' to the regexp on line 538 in initializer.rb fixed the problem for me, however I think this isn't ok for non-windows JRuby deployments.