I woud like to thank Robin Mayfield for indirectly resolving my 
similar issue with RMagick. 

RMagick is now installed and working. 

Here's what I did: 

1. Downloaded 0.9.4 RubyGems zip file. 

2. Ran the setup.rb 

3. From within the unzipped RMagic-win32 directory I ran: gem install 
rmagick-1.14.1-win32.gem --local 

I didn't need to insert require 'RMagick' in the environment.rb file. 

Yeeha!!

Apparently, RMagick doesn't work with RubyGems 0.9.5. 

Thanks again. 

Regards 

Walter 

Thanks to Walter Lockhart for reposting this.