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The rails application template doesn't work as it sets the required neo4j version to 2.2.0rc1 which apparently doesn't exist.
Fetching source index for https://rubygems.org/
Could not find gem 'neo4j (= 2.2.0.rc1)' in any of the gem sources listed in your Gemfile.
Oh that's probably because the README links to:
rails new myapp -m http://andreasronge.github.com/neo4j/rails.rb
instead of the version you just merged from my pull request under:
rails new myapp -m http://andreasronge.github.com/rails3.rb --skip-active-record
For some strange reason, the latest version of default.rb has not yet been published to your gh-pages.