Alright the solution (in case anyone else runs into this) has to do with "custom_fields". Any custom fields have to be referenced as such (for some reason you didn't really need to do this in Rails 3.2 but you do in Rails 4.1)
So all I did was change the code to this:
badges = [ {id: 1, name: 'Democratic-Society', description: "Voted for two bands", custom_fields: {image: "demo_society2.gif"} }]
And then in my view:
<%= image_tag (badge.custom_fields[:image]), :alt => badge.description, :float => "left" %>
And VOILA!
Credit to marcosgugs over at github for the solution.