There's no reason for web_git to interact with the main Rails application, unlike say, ActiveAdmin. So it need not be a Rails engine. But there's every reason for it not to interact with the Rails app, e.g. to not be broken by a students' bug or locked out by a before_action.
Could we make it a standalone Sinatra app that lives in the same folder and is easy to launch in a separate Terminal tab? Would it still be a gem or just a file in the project folder? A gem seems neater.