I believe it's in response to trying to consolidate where gems are
kept. (why ARE there so many directories used for this? the difference
between say /var/lib/gems, /usr/lib/ruby/1.8,
/usr/lib/ruby/gems/1.8/gems seems a little flattened... but I'm kind
of new to all this.)

so this is what I get:

$ gem
/usr/local/lib/site_ruby/1.8/rubygems/custom_require.rb:27:in
`gem_original_require': no such file to load -- sources (LoadError)
        from /usr/local/lib/site_ruby/1.8/rubygems/custom_require.rb:27:in
`require'
        from /usr/local/lib/site_ruby/1.8/rubygems/source_info_cache.rb:6
        from /usr/local/lib/site_ruby/1.8/rubygems/custom_require.rb:27:in
`gem_original_require'
        from /usr/local/lib/site_ruby/1.8/rubygems/custom_require.rb:27:in
`require'
        from /usr/local/lib/site_ruby/1.8/rubygems/remote_installer.rb:12
        from /usr/local/lib/site_ruby/1.8/rubygems/custom_require.rb:27:in
`gem_original_require'
        from /usr/local/lib/site_ruby/1.8/rubygems/custom_require.rb:27:in
`require'
        from /usr/local/lib/site_ruby/1.8/rubygems.rb:112:in `manage_gems'
        from /usr/bin/gem:10