If you've not bought the Agile Web D. book or the new Rails Recipes book, you really should. A lot of the questions you're asking are in there along with a lot of really important concepts. You need to look into observe_field which monitors a form field for changes and then updates an element (usually a div with an id) with the results from an AJAX call. Then you need an action that builds the second select box based on what the observe_field sends in.
on 2006-02-14 00:24