Perhaps you have several versions of the rack installed, try running the gem uninstall rack and see if you have two choices: Rack 1.1 and Rack 1.2.3. If so, select Uninstall Rack 1.1.
If this still does not work, just uninstall Rack and try running the package update.
I had this problem when I used several rake versions 0.8.7 and 0.9.2, it helped me.
rookieRailer
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