I ran into similar problems upgrading my app to rails 3. I'm still using Geokit for geocoding but Active Record scopes for distance based database queries. It's pretty convenient, and you still get all of the Active Record 3 goodness. Here's an example from my User model:
scope :near, lambda{ |*args|
origin = *args.first[:origin]
if (origin).is_a?(Array)
origin_lat, origin_lng = origin
else
origin_lat, origin_lng = origin.lat, origin.lng
end
origin_lat, origin_lng = deg2rad(origin_lat), deg2rad(origin_lng)
within = *args.first[:within]
{
:conditions => %(
(ACOS(COS(#{origin_lat})*COS(#{origin_lng})*COS(RADIANS(users.lat))*COS(RADIANS(users.lng))+
COS(#{origin_lat})*SIN(#{origin_lng})*COS(RADIANS(users.lat))*SIN(RADIANS(users.lng))+
SIN(#{origin_lat})*SIN(RADIANS(users.lat)))*3963) <= #{within}
),
:select => %( users.*,
(ACOS(COS(#{origin_lat})*COS(#{origin_lng})*COS(RADIANS(users.lat))*COS(RADIANS(users.lng))+
COS(#{origin_lat})*SIN(#{origin_lng})*COS(RADIANS(users.lat))*SIN(RADIANS(users.lng))+
SIN(#{origin_lat})*SIN(RADIANS(users.lat)))*3963) AS distance
)
}
}
Here's a blog post with a little more detail on the subject: http://stcorbett.com/code/distance-queries-with-rails-3-without-geokit/