What is the problem:
gem install --local pkg/rb-readline-0.5.0.pre.1
ERROR:  Could not find a valid gem 'pkg/rb-readline-0.5.0.pre.1' (>= 0) in any repository

What seems to be the cause:
It appears that an incorrect file name was used in Rakefile.

How are you fixing it:
Fixing rake install error by adding .gem to the filename at line 56
call to sh <gem file name>

Thanks for the great gem.