I've seen this type of UI element before in a few places, and I'm wondering what it's called and if there is a plugin for it in Rails. It's basically a compact way to let people add/remove/create new of something, commonly tags or labels.
I could write it from scratch but would rather not if it's already created.
The pull down might have some elements like this, just as an example, then it uses AJAX to update in place:
APPLY TAG:
first tag
second tag
third tag
REMOVE TAG
a tag I have already applied
CREATE NEW
Add new tag...
The 'Add new tag...' would bring up a javascript dialog so they can type a new tag name.
I've seen UI elements like this in Pivotal Tracker, and Gmail's canned response feature (Gmail labs).