Running into issues when running Rails on Ubuntu

Generate the community engine migrations:

  $ script/generate plugin_migration

myuser@compy:~/Projects/MyProject$ script/generate plugin_migration
/home/myuser/Projects/MyProject/config/../vendor/plugins/engines/boot.rb:4: This version of the engines plugin requires Rails 2.1.1 or later! (RuntimeError)
    from /usr/local/lib/site_ruby/1.8/rubygems/custom_require.rb:31:in `gem_original_require'
    from /usr/local/lib/site_ruby/1.8/rubygems/custom_require.rb:31:in `require'
    from /home/myuser/Projects/MyProject/config/environment.rb:12
    from /usr/local/lib/site_ruby/1.8/rubygems/custom_require.rb:31:in `gem_original_require'
    from /usr/local/lib/site_ruby/1.8/rubygems/custom_require.rb:31:in `require'
    from /home/myuser/Projects/MyProject/vendor/rails/railties/lib/commands/generate.rb:1
    from /usr/local/lib/site_ruby/1.8/rubygems/custom_require.rb:31:in `gem_original_require'
    from /usr/local/lib/site_ruby/1.8/rubygems/custom_require.rb:31:in `require'
    from script/generate:3

myuser@compy:~/Projects/MyProject$ ruby -v
ruby 1.8.7 (2008-08-11 patchlevel 72) [i486-linux]

myuser@compy:~/Projects/MyProject$ gem list

*** LOCAL GEMS ***

actionmailer (2.2.0, 2.1.2, 2.1.1)
actionpack (2.2.0, 2.1.2, 2.1.1)
activerecord (2.2.0, 2.1.2, 2.1.1)
activeresource (2.2.0, 2.1.2, 2.1.1)
activesupport (2.2.0, 2.1.2, 2.1.1)
aws-s3 (0.5.1)
builder (2.1.2)
capistrano (2.5.0)
cgi_multipart_eof_fix (2.5.0)
daemons (1.0.10)
fastthread (1.0.1)
gem_plugin (0.2.3)
haml (2.0.4)
highline (1.4.0)
hpricot (0.6.164)
htmlentities (4.0.0)
mime-types (1.15)
mongrel (1.1.5)
net-scp (1.0.1)
net-sftp (2.0.1)
net-ssh (2.0.4)
net-ssh-gateway (1.0.0)
rails (2.2.0, 2.1.2, 2.1.1)  <--- clearly I have rails 2.1.1 or greater
rake (0.8.3)
RedCloth (4.1.0)
rmagick (2.7.1)
sqlite3-ruby (1.2.4)
xml-simple (1.0.11)

# Specifies gem version of Rails to use when vendor/rails is not present
RAILS_GEM_VERSION = '2.1.0' unless defined? RAILS_GEM_VERSION