From my reading of it (disclaimer: I've only done a tiny amount with ruby) A package uses rubygem to install a-blah 1. This causes packages using require 'blah' that are not connected to rubygems to break if the a-blah installation overwrote an existing version of blah 1.1 (which you installed alongside said packages)

Yeah, but I wouldn't install alongside. (Nor do I install anything via gem.)