When I try to setup basic installation and initiation of server using Rails 4.0.0 on Ruby 2.0.0, I\'m facing the following error message.
/usr/local/lib/ruby
This happened to me as well. It turned out that I had originally installed SQLite 1.3.10, but then I copied some gems from the Rails tutorial screencasts project and it listed SQLite 1.3.9. Then I got the same error you did. I changed it back to 1.3.10 and it worked.
(This is on Windows 7. I was running the screencast tutorial on Cloud9 IDE).