rails sure evolves fast, now upto version 2.0.2. But I still have boat load of apps running on 1.2.x, spend quite sometime to update all the code and lock down the rails gem version to pre 2, so I can upgrade to latest rails for new apps.

It's sure hard to keep up with DHH.

If you've put "RAILS_GEM_VERSION = '1.2.5' unless defined? RAILS_GEM_VERSION" or frozen rails gem into your old app to 1.2.5 or 1.2.6, and when you run script/server, and get cryptic error like

/usr/lib/ruby/site_ruby/1.8/rubygems.rb:246:in `activate': 
can't activate activesupport (= 2.0.2), already activated activesupport-1.4.4] (Gem::Exception)

Most likely you're missing some gem. run script/console to find the missing gems.

Better solution is to allow your rail apps to define all gems dependencies, and install it automatically.