Apache is treating my script as a text file rather than running 
it.Permission are correct, ruby and mod-ruby are both 
installed (according to apache diagnostics).

'
##!/usr/bin/ruby
#print "HTTP/1.1 200 OK\r\n"
#print "Content-Type: text/plain\r\n\r\n"
puts "<html>"
puts "<title>"
puts "Test page"
puts "</title>"
puts "<body>"
puts "foobar"
puts "</body>"
puts "</html>"
'

My http.conf is the one specified by modruby.net:

"
[snip]
# If the ruby module is installed, this will be enabled.
<IfModule mod_ruby.c>
  # for Apache::RubyRun
  RubyRequire apache/ruby-run
                                                                                                                                      
  # exec files under /ruby as ruby scripts.
#  <Location /cgi-bin>
#    SetHandler ruby-object
#    RubyHandler Apache::RubyRun.instance
#    Options ExecCGI
#  </Location>
                                                                                                                                      
  # exec *.rbx as ruby scripts.
  <Files *.rbx>
    SetHandler ruby-object
    RubyHandler Apache::RubyRun.instance
#    Options ExecCGI
  </Files>
</IfModule>
"

If I run it as a straight cgi script it runs fine.