After upgrading to IDEA version 9821 and ruby plugin 2.0.230959, I found I could no longer run unit tests or the development server. I received an error message stating something like:
'Compiler output directory not specified. Change this in the project settings'.
The settings dialog did not help, as this directory was set and was valid for the project. There appeared to be no module-level setting. However, the module (iml) file contained the following XML element:
<component name="NewModuleRootManager" inherit-compiler-output="false">
I changed the 'inherit-compiler-output' option to 'true' and things began to work.