RedCloth 4.2.6 is broken on Mac OS X. It appears to be related to the case sensitive require fix. These steps expose and fix the problem on my machine.
$ ruby -v
ruby 1.8.7 (2009-12-24 patchlevel 248) [i686-darwin10.3.0], MBARI 0x6770, Ruby Enterprise Edition 2010.01
$ gem -v