Rails / RubyGems version mismatch (Mac OS-X)

Having finally decided to make shift to Rails 2, was experimenting on Mac OS-X. Got the following when trying to generate a controller

$ ruby script/generate controller Site
Rails requires RubyGems >= 1.3.1 (you have 1.2.0). Please `gem update --system` and try again.
matts-MacBook:qualitymatters matthew$ gem update --system
Updating RubyGems
Updating rubygems-update
ERROR:  While executing gem ... (Gem::FilePermissionError)
    You don't have write permissions into the /usr/bin directory.

Various messings around later, and got success with:

$ sudo gem install rubygems-update
$ sudo update_rubygems