There is a problem during Rally App SDK 2.0p environment setup on Windows 7 (64-bit). I have installed Ruby 1.8.7-p358 from rubyinstaller.org and managed to install rake Rub
Try this gem install libv8 -v '3.16.14.3' -- --with-system-v8
Reference: Error installing libv8: ERROR: Failed to build gem native extension
The gem you try to install depends on libv8
gem, which is nothing more than a wrapper for Google V8 JavaScript VM.
There is no pre-compiled libv8 for Windows (like there is for Linux or OSX), this means it needs to build V8 from scratch.
The code around the build process of V8 is not very portable, not to mention that to compile libv8 you need Python installed :-P
Until today nobody was able to follow the instructions for libv8 pre-compilation on Windows, following the repository instructions:
https://github.com/cowboyd/libv8
Sorry not been able to provide you a better response.
For building gem native extensions in Windows when you install a gem, you usually need the DevKit installed too:
http://rubyinstaller.org/downloads/ - go to the devkit download link
Their github page has instructions for installing it: https://github.com/oneclick/rubyinstaller/wiki/Development-Kit
I would also recommend using Ruby 1.9.3 instead of 1.8.7, but that shouldn't be much of an issue
Hope that helps.