The first step is getting Rails installed. Most of my students have Windows machines, so the best place to get Rails for Windows would be RailsInstaller.org (I haven't really searched too long, but this seem sufficient). I wouldn't worry about installing the SQL Server stuff unless you know you are going to use it. For now, just stick with SQL lite. You will want Git. The only downside to all of this is that there isn't RVM, which allows you to switch between Ruby versions and create gemsets. During the semester, all my student will be using Ruby version 1.9.2, so it won't be necessary for the class.
The next step is to create your first application. The video on RailsInstaller.org walks you through your first application. I plan on doing a similar demo in class also using the scaffolding. After, I will walk students through the code, starting at the routes.rb, then going to the controller, and then the model and view.