Wow some good stuff turned up in this thread.
What exactly do you mean by projects?
Making a blog or some kind of web application.
Yer anything really, whole applications, plugins and open source contribution. Projects are a great way of learning and show that you actually enjoy programming.
As far as collage, does having a four year degree open up more doors then just a 2?
It might really depend on the company I would expect but I'm not sure what the general view of collage is in the RoR/programing world.
(though this might really depend on the size of the company)
This is dependent on you are and your employer, and many people have different views on this.
Me personally, I believe a degree is not needed. I think that teaching yourself a language/s, playing around with the language, creating projects for yourself, taking an active part in the community, having an active web pressence (twitter, a blog...) etc etc. But I think the main thing is about being passionate about what you do. I would 100% prefer to work with a someone who only has little experience but is really passionate than someone who has some amazing programming-fu but hates his job and really doesn't care.
Heres a post on the 37 Signals blog late last year that provided quite a lot of discussion on the topic