First, some people (not all) are using other tools than Ruby. They are looking for a solution to their problems. IMHO Ruby is not even present in the discussion when people make their choices. But Rails is. So I'm not sure that modernizing Ruby is sufficient. Building a modern framework around it could be though. I mean, people go to NodeJS because of Node, not because of Javascript...
I was about to mention this. I know of at least two (very) hot S13 YC companies that either built their web app in Rails or explicitly deal with Rails (not sure if One Month Rails is built in Rails or not, but it is pretty explicitly pro-Rails). Does Rails prevalence preclude Ruby from being a dying language? Depends on what you mean by dying. The dominance of Rails is probably something of a blessing and a curse for the broader Ruby world. I'm too new to it to have a strong position, but I will say that as a novice developer, I went with Ruby and Rails because there is a fantastic suite of tools for learning from scratch.