Re-iterating upgrade details: Due to a small bug, I lost lots of days trying to guess my problems.
(13:29:29) Ruy: olleolleolle:
Make a local MySQL user that does not require a password, and change your database.yml accordingly.
(My situation was that I had first used a passwordless root user, and soon after I added a root password, but the addition seemed to break something, so the above tip helped me out a lot.)
Plus the upgrade instructions at the Rails site.
You go, girls and boys!