A few days ago I asked for reports of what libraries were broken by RubyGems 1.8. Here's a comprehensive list of what was reported so far, and a status update on each. Please note that while these updates reflect the best of my knowledge, they're based primarily on conversations I've had and aren't necessarily completely reliable. That said, several of these issues are actually slated to be retroactively fixed in RubyGems itself when Evan releases 1.8.6 on Monday, so it may not matter.

Rails 2.3.11 (confirmed and fixed)

There was a small incompatibility issue in Rails that Ryan Davis fixed on May 25th. Rails 2.3.12 will be released on Monday, June 6th and will make Rails 2.3 compatible with RubyGems 1.8.5 again. If you want to try it out now, try updating to the 2-3-stable branch via git.

Redmine (confirmed and fixed) 

Redmine is currently broken, but this is related to the Rails 2.3.11 issue. Should be fixed simultaneously.

Spork (confirmed and fixed)

I looked into this myself, though I only focused on obvious issues because I didn't have a link to a specific mailing list post or bug report. But when I installed the latest stable spork gem (0.8.5), I found that running the spork executable failed to run and spewed out telltale gem related issues. The good news is that from my very limited testing, at least that issue is solved by using the current prerelease (spork-0.9.0.rc8). Please try out the pre-release and let me know if it doesn't fix the breakage for you (and also, file a ticket on github, too)

rake-compiler (confirmed and fixed) 

An issue in the intersection of RubyGems and Rake was found and fixed in rake-compiler 0.7.9. Thanks Luis!

UPDATE: There may be an issue in the intersection of RubyGems and Rake after all, see the comment from Luis Lavena in the comments thread. It is being investigated

There was some breakage in rake-compiler but these seem to be related to Rake 0.9, not RubyGems 1.8. However, one user claims that he cannot get rake-compiler working on RubyGems 1.8.5. So far, I've not seen anyone able to reproduce his issues. I attempted to reproduce them myself, and could not, though I don't know anything aboutrake-compiler and just got as far as compiling "Hello World"

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So far, this is all I've heard about. Please investigate these reports on your own, because I'm a complete n00b here. But also, please report anything that isn't on this list, so that I can look into new issues as well. RubyGems 1.8 compatibility is important, because it is what will ship with Ruby 1.9.3, and in fact, has already been merged into what will become the Ruby 1.9.3 release.