Installing PostgreSQL with Ruby on Rails on Mac OS X - ruby-on-rails-3

Question

I have everything installed. But when I run "rake db:create", I get the following:
Ken-Vogts-MacBook:sixmonths ken$ rake db:create
(in /Users/ken/sixmonths)
rake aborted!
no such file to load -- pg
Here is my database.yml:
development:
adapter: postgresql
encoding: unicode
database: sixmonths_development
pool: 5
username: postgres
password: xxxxxxxx
test:
adapter: postgresql
encoding: unicode
database: sixmonths_test
pool: 5
username: sixmonths
password: xxxxxxxx
production:
adapter: postgresql
encoding: unicode
database: sixmonths_production
pool: 5
username: sixmonths
password: xxxxxxxx
I can see pg is installed when I run: gem list
I tried replacing "postgresql" with "pg" per another post on stackoverflow, but it resulted in this:
Ken-Vogts-MacBook:sixmonths ken$ rake db:create
(in /Users/ken/sixmonths)
Seems cool, right?
Nope. Next, I try "rake db:schema:dump" and I get this:
Ken-Vogts-MacBook:sixmonths ken$ rake db:schema:dump
(in /Users/ken/sixmonths)
rake aborted!
Please install the pg adapter: `gem install activerecord-pg-adapter` (no such file to load -- active_record/connection_adapters/pg_adapter)
Of course there is no "activerecord-pg-adapter". What do I have to do to make this work?
Gemfile Contents:
source 'rubygems.org'
gem 'rails', '3.0.0'
# Bundle edge Rails instead:
# gem 'rails', :git => 'git://github.com/rails/rails.git'
gem 'sqlite3-ruby', :require => 'sqlite3'
# gem 'unicorn'
# gem 'capistrano'
# gem 'ruby-debug'
# Bundle the extra gems:
# gem 'bj'
# gem 'nokogiri'
# gem 'sqlite3-ruby', :require => 'sqlite3'
# gem 'aws-s3', :require => 'aws/s3'
# Bundle gems for the local environment. Make sure to
# put test-only gems in this group so their generators
# and rake tasks are available in development mode:
# group :development, :test do
# gem 'webrat'
# end

Answer 1

Rails 3 will only let you access the gems you specify in your Gemfile, so even if you have it installed in your system-wide gems by doing a gem install pg, it won't be able to find it.
Add gem 'pg' to your Gemfile, run bundle install, and you should be good to go.

Answer 2

I tried many things that I saw as solutions elsewhere, but the only thing that worked for me was replacing
gem 'sqlite3'
with
gem 'pg'
in Gemfile. My database.yml looks the same as yours.
Now both >rake db:create and >rake db:migrate work.
This is on OSX Snow Lepoard, Rails 3.0.7, Postgres 9.0.
And the output from:
gem list --local
is
pg (0.11.0)
polyglot (0.3.1)
postgres-pr (0.6.3)
rack (1.2.2, 1.0.1)
rack-mount (0.7.2, 0.7.1, 0.6.14)
rack-test (0.6.0, 0.5.7)
rails (3.0.7, 3.0.5, 2.3.5, 2.2.2, 1.2.6)