Ruby-odbc uses some native code and IronRuby doesn't support native gems.
Sam, I was able to get ruby-odbc working on Windows 7. I wrote a blog post on how I got rails 3 up and running on windows 7. It includes a couple of steps that helped me get ruby-odbc working on windows.
Here's the link: Getting Rails 3 Up on Windows Connecting to SQL Server.
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