<p>I'd like to use Rich Text Editing in place on forms in order to let admins change instructions.   What are the best options for doing this?</p>

<p>[To be more clear - the admins are non-technical but may want to control some formatting without using markup or with as little markup as possible.  What I'd like is for them to be able to edit inline all AJAXy with an RTE featuring some formatting controls and then submit and be able to see what the instructions will look like to the end user without changing pages.</p>

<p>With Regards to plugins specifically, what I'd like to know is which Rich Test Editing plugins are the best for use in Rails.  Easiest to implement, clearest API, easiest to use inline, etc... ]  </p>

I'm not sure if I fully understand the question, but if you just ask about which editor to use, there are many options and none of them is a matter of Rails - you can use any of them just by adding a little piece of javascript into your markup. Nice and up to date overview can be found here:
http://bulletproofbox.com/web-based-rich-text-editors-compared/
.