Hopefully you may have solved the issue by now, if not, this is what you can do on your mac
# On Mac OS X:
# sudo gem install mysql -- --with-mysql-dir=/usr/local/mysql
# On Mac OS X Leopard:
# sudo env ARCHFLAGS="-arch i386" gem install mysql -- --with-mysql-config=/usr/local/mysql/bin/mysql_config
# This sets the ARCHFLAGS environment variable to your native architecture
This is from the config/database.yml file
To uninstalling previous version of gem may not be required, but you can uninstall it using:
sudo gem uninstall mysql