Adam Wiggins at Bitscribe (where I started last week) has created a Rails IDE which is itself a Rails app.
It's at a beginning stage, in fact still a very early stage in some respects, but it already features breakpointer integration with onscreen line numbers, an ActiveRecord-specific object inspector, and of course a nifty screencast.
Of course I have to point out that, like Pat Maddox with his declarative workflow, Adam is making Rails better by making it more like Seaside. These are features which Seaside has had for a while. If we get to the point where you can edit Rails code from the browser directly, however -- the way you already can in Seaside -- that'll be pretty remarkable. Perhaps even incredible. Certainly, this is an interesting project.
I should also point out that Bitscribe is hiring.