Thank you but that wasn't it.

I upgraded to 0.8.11 and nothing happened.

But I found the problem (I am posting it for others to see it):

I used ZoneAlarm as my firewall and even though I stopped it before I
executed gems apparently it still had been running some process in
background preventing gems from executing. So I had to uninstall
ZoneAlarm in order for gems to work.

Since ZoneAlarm is a popular firewall, maybe this behaviour should be
documented on the RubyGems website, no ?