Here is what worked for me last night:
gem install rubygems-update
Note that on systems like Ubuntu, you have to precede these commands
with "sudo", I was updating a Fedora box.
I got these instructions from the following link:
If you scroll down to section 3.3 titled Updating RubyGems, you will see
Note that these instructions are listed for updating RubyGems prior to
0.8.5, however, they worked for me even though I was upgrading from
RubyGems 1.1.0. I am not arguing with what works.
Hope this helps.