As discovered in the thread

http://rubyforge.org/forum/forum.php?thread_id=12223&forum_id=7869

RubyGems 0.9.2 breaks the net/http "patch" included with RubySSPI. The problem manifests as the following error when "gem" commands are run (or any ruby script if RUBYOPT is set to "-rubygems", which includes rubygems automatically):

D:/wwwdev/Ruby/lib/ruby/1.8/net/http.rb:7:in `require': no such file to load -- rubysspi/proxy_auth (LoadError)
from D:/wwwdev/Ruby/lib/ruby/1.8/net/http.rb:7
...

To fix the error, change the patch "net/http.rb" found in the lib directory like so:

unless defined? DISABLE_RUBY_SSPI_PATCH
if defined? Gem
$: << "#{Gem.path}/gems/rubysspi-1.0.6-i386-mswin32/lib"
require 'rubysspi/proxy_auth'
end
end

This ensures that the rubysspi/proxy_auth file will be loaded correctly.