It's been a long time since we did any work on IronRuby support so it's quite possible that this may be an issue. Just to give you a bit of background... We always said that we wouldn't be updating our IronRuby support until after the release of IronRuby 1.0. Initially the IronRuby team were expecting to ship the finished product fairly rapidly. John Lam, for example, predicted in June 2007 that it be fully Rails-compatible (and, we sort of assumed, at version 1.0) in "under 18 months": http://www.iunknown.com/2007/06/ironruby_and_ru.html
We produced our IronRuby IDE in early 2008 in the expectaion that the final release of IronRuby would appear later that year. As the challenge to get to IronRuby 1.0 has clearly proven to be greater than was originally expected, we are still waiting for the final solid implementation to appear (I see IronRuby is currently at 0.5). Which explains why we haven't yet updated our IronRuby IDE.
In the meantime, I'll take a look to see if there is any simple fix from Ruby In Steel. As an interim measure might it not be possible to rename the IronRuby executable?