We study cold rubidium Rydberg atoms, initially prepared in state 59D 5/2 , guided along a two-wire magnetic atom guide. The evolution of the atoms is driven by the combined effects of internal-state transitions and dipole forces acting on the center-of-mass degree of freedom. State-selective field ionization, applied at a variable delay time, is used to investigate the evolution of the internal-state distribution. We observe a broadening of the field ionization spectrum caused by population transfer between Rydberg states. At late times, the distribution of the remaining Rydberg atoms becomes biased toward states with high principal quantum numbers. The population transfer is attributed to thermal transitions and, to a lesser extent, initial state mixing due to Rydberg-Rydberg collisions. Characteristic components in spatially and temporally resolved distributions of the ion signal are interpreted in the context of the underlying physics. The system is simulated with a model in which the center-of-mass dynamics are treated classically, while the internal-state dynamics are treated quantum mechanically. The simulation qualitatively reproduces most experimental findings and provides experimentally inaccessible information.