I developed in RoR under Windows for a few years, it's bearable, but Linux (or Mac) is much better for this. Lots of gems and plugins are considerably harder to install on Windows (quixml, for example).
My favorite text editor under Windows is Textpad, Eclipse is also pretty good.
If you want to use ls, find, grep... in Windows console, just download some package of their Win32 ports, install them and add to your PATH (Cygwin is definitely better, but also harder to install). You might also try out Powershell, it's supposed to be a replacement for unix command line by Microsoft.