Just in case someone else trips over this, Rails 3.0.x and mysql2 0.3.x does not work as the mysql2 developers have removed the ActiveRecord adapter in preparation for Rails 3.1 which in fact will bundle it.
WARNING: This version of mysql2 (0.3.2) doesn't ship with the ActiveRecord adapter bundled anymore as it's now part of Rails 3.1
WARNING: Please use the 0.2.x releases if you plan on using it in Rails <= 3.0.x
The way to resolve this for the time being is to make sure that your Gemfile contains the line
gem 'mysql2', '< 0.3'
This will ensure that your application uses the latest version from the 0.2.x branch. Just remember to run bundler once you've edited the Gemfile.