>> You'll probably need
>>
>> ./configure --with-readline-dir=/usr/local
> 
> If it were as simple as that, I wouldn't have mentioned it. But there
> is no such flag to ruby's configure. I did try it, though, to no
> effect. 

Did you throw away ext/readline/Makefile before running configure?
Otherwise I don't think ext/extconf.rb is ever ran...

bye,
Kero.