I decided to install Ruby 1.9.1 on Vista - since I may as well work with the latest version but I did leave Ruby 1.8.6 installed as well in case there were some incompatibility issues.
I ran Ruby 1.9.1 for a day or two with no problems until I installed the mysql gem (gem install mysql) and immediately ran into failing database operations. After looking around the net the best fix to the problem that I found was as follows:
Solution: Copied libmysql.dll from this address: http://instantrails.rubyforge.org/svn/trunk/InstantRails-win/InstantRails/mysql/bin/ to c:ruby19bin. The fix works with mysql version: 5.1.30, which is what I have installed and it replaces the dll that was installed by the mysql gem. So far everything looks like it is working properly.