The mysql gem was removed from the rails 2.3.2. and you need to install it via the gem install mysql command
But! There is a problem compiling it. seems that the mysql cant find the libmysql so..here are the options:
yum install openssl openssl-devel

Configure with path to mysql_config and install the mysql api via gem:

# cd /usr/lib/ruby/gems/1.8/gems/mysql-2.7
# ruby extconf.rb --with-mysql-config=/usr/bin/mysql_config
# make
# ruby ./test.rb [hostname [user [passwd [dbname [port [socket [flag]]]]]]]
# make install
# gem install mysql

Source: http://www.linuxweblog.com/ruby-on-rails-install

And after that you can read the README.html located in the mysql gem directory :)

Debian/Ubuntu

 sudo aptitude install libmysqlclient-dev libmysql-ruby  libmysql++-dev ruby-dev