Although Apple have included Ruby with Tiger there are a few things that do not work right.
For my own future reference (and for anyone else that is interested) this is how I got it working with MySQL correctly on OSX Tiger and MySQL's own OSX binaries.
Follow the install intructions found here:
Rolling with Ruby on Rails on Mac OS X Tiger
Once installed open a Terminal window and enter the following:
sudo sh
(enter the admin password)
curl -O rufy.com/fix-ruby-tiger.sh; sh fix-ruby-tiger.sh
gem install mysql -- --with-mysql-lib=/usr/local/lib/mysql --with-mysql-include=/usr/local/include
exit
This should fix any Ruby issues and compile a fully functional Ruby MySQL driver ready for you to use.