Distributing Rails Applications as Native Applications

I've decided to use jruby and look into packaging the application as a java app.

Can you Distribute a Ruby on Rails Application without Source?

Your best option right now is to use JRuby. A little bit of background: My company (BitRock) works with many proprietary and commercial open source vendors. We help them package their server software, which is typically based on PHP, Java or Ruby together with a web server or application server (Apache, Tomcat), the language runtime and a database (typically Postgres, MySQL) into a self-contained, easy to use installer. We have a large number of PHP-based customers (including HelpSpot, which you mention) but also several Rails-based ones. In the case of the RoR customers the norm is to use JRuby together with Tomcat or Glassfish although in some cases we also bundle a native Ruby interpreter to run specific scripts that rely on libraries not yet ported to JRuby (usually not core to the application). JRuby has matured quickly and in many cases it actually runs their code faster than regular Ruby. You will need to also consider that although porting your code to JRuby is fairly straightforward, you will need to invest some time on that. You may want to check JRuby Stack which is a free installer of everything you need to get started. Good luck!

Deploying Rails as a desktop application

Maybe out of topic, but if you want to make native application, perhaps make native application? I mean, what's the purpose to develop a web application and then host it locally?

At least, you could consider using free hosts, such as heroku. http://your-project-name.heroku.com will grant you a 5mb database and 1 worker. It's free, will save you a lot of troubles and will make it easier for you to deploy newer version to your clients.

Just have them put a bookmark on their desktop if they want to double click to open application.

How to extend my rails app to a native mobile app? API vs normal controller JSON

By responding with JSON in your "normal" controller you will be building an API, you don't need the API-only version of rails, or any particular gem to build and API, just an agreed interface (request/responses) for your apps to get all the information you want.

Distributing Rails Applications as Native Applications