Rails 3.0.0, Passenger 2.2.15:
gem \'paperclip\', :git => \'git://github.com/lmumar/paperclip.git\', :branch =
You can use bundle install --path vendor/bundle
to install the gems locally, instead of into system gems.
If you want to keep using system gems, though, it's just one line in your Apache configuration to tell Passenger where to find your system gems:
SetEnv GEM_HOME /Users/bob/.bundle
There's a slightly more elaborate writeup on my blog at Using Passenger with GEM_HOME set