Although I haven't tested it, the character-encodings library (currently in alpha) adds methods to the String class to handle UTF-8 and others. Its page on RubyForge is here. It is designed for Ruby 1.8.
It is my experience, however, that, using Ruby 1.8, if you store data in your database as UTF-8, Ruby will not get in the way as long as your character encoding in the HTTP header is UTF-8. It may not be able to operate on the strings, but it won't break anything. Example:
file.txt:
¡Hola! ¿Como estás? Leí el artículo. ¡Fue muy excellente!
Pardon my poor Spanish; it was the best example of Unicode I could come up with.
in irb:
str = File.read("file.txt")
=> "\302\241Hola! \302\277Como est\303\241s? Le\303\255 el art\303\255culo. \302\241Fue muy excellente!\n"
str += "Foo is equal to bar."
=> "\302\241Hola! \302\277Como est\303\241s? Le\303\255 el art\303\255culo. \302\241Fue muy excellente!\nFoo is equal to bar."
str = " " + str + " "
=> " \302\241Hola! \302\277Como est\303\241s? Le\303\255 el art\303\255culo. \302\241Fue muy excellente!\nFoo is equal to bar. "
str.strip
=> "\302\241Hola! \302\277Como est\303\241s? Le\303\255 el art\303\255culo. \302\241Fue muy excellente!\nFoo is equal to bar."
Basically, it will just treat the UTF-8 as ASCII with odd characters in it. It will not sort lexigraphically if the code points are out of order; however, it will sort by code point. Example:
"\302" <=> "\301"
=> -1
How much are you planning on operating on the data in the Rails app, anyway? Most sorting etc. is usually done by your database engine.