check your Gemfile.lock. Search for "sqlite3". It's one of your other gems that has a dependancy on sqlite3 that gets loaded first, thus making bundler think an incompatible version is already loaded when it tries to load it a second time.
You might get around this by
1) Switching the order of the Gems
2) Specifying exactly which version of sqlite3 to use before both of the Gems that depend on it are loaded
#2 usually works for me when I have that kind of a problem. As far as why it would happen on an exact clone of paperclip master, that I cannot answer.