I couldn't find anyone else with this problem so I thought I'd ask.
rails new myNewRailsApp
This works fine.
cd myNewRailsApp
ls
Reveals everything seems to have generated properly.
rails server
This creates a new directory "server" and creates a new rails application. It also seems to happen with "generate" and other command words. I'm on version 3.0.9 (considering rolling back now), and I purged it, all gems, and reinstalled. Am I missing something obvious?
Edit: I'm running on Ubuntu 11.04.
bundle exec rails server.gem listto see you don't have rails 2 installed. Also check your system packages to see, that you have not installed rails package from ubuntu repositories.