From any controller, you can define the following method.
 def copy_template_database
     template_name = "customerdb1" # Database to copy from
     new_name = "temp" #database to create & copy to
        #connect to template database to copy.  Note that this will override any previous
        #connections for all Models that inherit from ActiveRecord::Base
        ActiveRecord::Base.establish_connection({:adapter => "mysql", :database => template_name, :host => "olddev",
        :username => "root", :password => "password" })
     sql_connection = ActiveRecord::Base.connection 
        sql_connection.execute("CREATE DATABASE #{new_name} CHARACTER SET latin1 COLLATE latin1_general_ci")
     tables = sql_connection.select_all("Show Tables")
        #the results are an array of hashes, ie:
        # [{"table_from_customerdb1" => "customers"},{"table_from_customerdb1" => "employees},...]
     table_names = Array.new
     tables.each { |hash| hash.each_value { |name| table_names << name }}
     table_names.each { |name| 
      sql_connection.execute("CREATE TABLE #{new_name}.#{name} LIKE #{template_name}.#{name}")
      sql_connection.execute("INSERT INTO #{new_name}.#{name} SELECT * FROM #{template_name}.#{name}")
     }
        #This statement is optional.  It connects ActiveRecord to the new database
     ActiveRecord::Base.establish_connection({:adapter => "mysql", :database => new_name, :host => "olddev",
        :username => "root", :password => "password" })
    end
Note that I do not know for sure if this will keep foriegn key integrity.  I think it depends a lot on how the template Database is created.