I like both Io and Ruby, but they have much different goals. The moderating qualities that make Ruby seem halfway there to you were an intentional design choice, because Matz wanted the language to feel familiar and friendly to programmers coming from other languages. Ruby also took a lot of good things from Perl (built-in regexes and other high-quality string processing facilities, especially) that helped it fit into the Unix scripting ecosystem in a way that purer languages like Io never would.

I would never consider embedding Ruby like I would Io or Lua (although mruby is promising); on the other hand, part of what helped me learn and stick with Ruby was using it for innumerable Unix scripting projects that would have been much more awkward in a language like Io.

(Io also suffers from Scheme's problem, where a minimalist language is more likely to calve a multitude of private and mutually incompatible frameworks.)