Is it time to upgrade to Ruby 1.9?
My short answer is:
"No".
My long answer is:
Version 1.9.1 is still a development branch. It is fun to play with, and you should play around if you are interested, but there is still a lot of shakeout going on. Many gems and libraries are still being adapted to it.
So yes to explore, no for production use.
At home, I'm writing code that runs under both 1.8 and 1.9 (eg declaring encoding and avoiding strings.each), and use 1.9 when it's faster, and switch back to 1.8 if I use a gem that doesn't like 1.9.
But to use a snowclone, "Don't try this at work".
There's a good site that details the compatibility of various gems with Ruby 1.9 called http://isitruby19.com.
I wrote a guide for Ruby 1.9.1-related stuff which you may be interested in. It shows you how to edit the libraries to get them to work on your system.