Doh! It was another silly mistake. I installed the plugin by executing this line on my Windows rad rails console.
script/plugin install http://github.com/kalasjocke/authlogic_facebook_connect.git
Just now I noticed that the /vendor/plugins/authlogic_facebook_connect
dir is empty. The issue is on windows there we need to pass a trailing slash to the end of URL to get the directory contents. So I ran this and restarted the server, and it works.
script/plugin install http://github.com/kalasjocke/authlogic_facebook_connect.git/ --force
+ ./README.rdoc
+ ./init.rb
+ ./lib/authlogic_facebook_connect.rb
+ ./lib/authlogic_facebook_connect/acts_as_authentic.rb
+ ./lib/authlogic_facebook_connect/helper.rb
+ ./lib/authlogic_facebook_connect/session.rb
+ ./lib/authlogic_facebook_connect/version.rb