Encoding shows up in Ruby 1.9 as part of the multibyte change made to String. That said, Rails 2.3.4 does make reference to Encoding::UTF_8 but those references are conditional. If you look at "activesupport-2.3.4/lib/active_support/core_ext/string/multibyte.rb" you'll see the gory details.
I can run db:seed with Ruby1.8.7/Rails2.3.4 with no problem. ruby --version => ruby 1.8.7 (2009-06-08 patchlevel 173) [powerpc-darwin9.7.0] rails --version => Rails 2.3.4 gem list mysql => mysql (2.8.1) mysql --version => mysql Ver 14.14 Distrib 5.1.39, for apple-darwin9.5.0 (powerpc) using readline 5.1
database.yml:
development: adapter: mysql encoding: utf8 reconnect: false socket: /tmp/mysql.sock database: auth-1.8_dev pool: 5 username: **** password: ********
seeds.rb
Page.create(:title => "It's all about the pie...", :body => "Welcome to Journeys")