Never did get to the bottom of this problem with compiling Ruby on devimg, may try to compile it later with the desktop cross compiler stuff.
In the meantime, if anyone's interested, if you follow the Ruby 1.6 links to the soureforge.jp site you will find that they have actually compiled to Ruby 1.8 on there and it works quite well.
BTW: It's not clear from the site what the ruby-dev package is, it's actually the set of header files and the static library needed to link into your own projects if you want to embed Ruby. You don't need it for normal Ruby scripting.
- Andy