Thanks Gabrielle, you are right. did have the one click installer.
removed the env variable you suggested. new error message now. think it
may be dll related:

Microsoft Windows XP [Version 5.1.2600]
(C) Copyright 1985-2001 Microsoft Corp.

C:\Documents and Settings\xxxx>irb
C:/ruby/lib/ruby/1.8/irb/input-method.rb:97: [BUG] Segmentation fault
ruby 1.8.4 (2005-10-29) [i386-mswin32]