That's a bit of an exaggeration. There isn't anywhere near the number of libraries that Python and Ruby have, nor anywhere near the general level of quality, but you can do an awful lot without ever touching C. Reams of Lua code have been written to script WoW by people who have no idea how to program in C. In fact, one of the primary design objectives of Lua is to have a language that's simple for non-programmers to learn.
> you're going to be looking around for easy, plug-and-play libraries and wondering why they don't exist.
That's very true. I spent the better part of a year working on open source web development libraries in Lua but eventually gave up because nobody was using them. There are fantastic libraries in Python and Ruby, at this point it's not really worth reinventing the wheel just to do the same stuff, but in Lua.
The interesting thing about the Lua community is that very few people use Lua as their primary day-in-day-out language, which leads to a distinct lack of fanboyism. I think that's in part why so few libraries exist. The typical Lua programmer attitude seems to be, "Why should I rewrite that in Lua when I can just use the one written in <insert language here>?"