Good conversation!
Geoff, it sounds like there is not an easy solution except perhaps if you bundle a version like 0.3.11 but rails *requires* 0.3.9, use ~>0.3.9 for the config.gem version rather than always incrementing it to 0.3.11. But that could create additional issues like missing a dependency, etc.
If I'm the only one who was bit by this issue, then so be it. But if
it keeps coming up, putting the full gem (with the extra 2.6 megs and
hundreds of files; yes it is a beast!) into vendor/ doesn't seem to be
all that bad, in this day and age of broadband 
Thanks guys, Adam