1) Install Ruby on Rails

2) do "gem install mysql"

3) Install the MySQL server version of your choise

4) Don't copy the libmysql.dll from your mysql dir to your ruby/bin dir.

Copy the libmysql.dll from 

http://instantrails.rubyforge.org/svn/trunk/InstantRails-win/InstantRails/mysql/bin/

to your ruby/bin dir.

5) start programming in RoR