This actually appears to work on 9k and not on 1.7. Notice in your log that the bacon.rb warning is coming from a 1.7.18-d19 install in rvm.
However, I can't reproduce it on either 9k or 1.7 on OS X. It may be specific to Linux.
@raggi Are you on Linux? If so, can you try running there with both versions and report back?