I had a similar problem it was with 1.9.2 on Ubuntu 10.04, but the symptoms were identical. In order to get it to work:
rvm pkg install readline
or prior to RVM version 1.6.32, you need the following command
rvm package install readline
Then:
apt-get install ncurses-dev
And then taking from their instructions at http://rvm.beginrescueend.com/packages/readline/
cd $HOME/.rvm/src/ruby-1.9.2-p0/ext/readline
ruby extconf.rb -- --with-readline-dir="$HOME/.rvm/usr"
make install
I had actually done a system rvm install on the server, so I needed to do this:
cd $HOME/.rvm/src/ruby-1.9.2-p0/ext/readline
ruby extconf.rb -- --with-readline-dir="/usr/local/rvm/usr"
make install
After that I was able to have full access to the console.