Just revisited this today. When I upgraded Rails I also upgraded capybara to the latest version (2.1.0). It seems that downgrading capybara from this version (2.1.0) to version 2.0.1 seemed to do the trick. I can see that capybara (2.0.1) uses xpath (1.0.0) while capybara (2.1.0) uses xpath (2.0.0) along with a different version of nokogiri gem. I have no idea if there is a link there but here is my gem file if anyone cares to take a look:
source 'http://rubygems.org'
gem 'rails', '3.2.12'
gem 'rack-mini-profiler'
gem 'authlogic'
gem 'rails3-generators'
gem 'mysql2'
gem 'declarative_authorization'
gem 'kaminari'
gem "foreigner"
gem 'validates_timeliness'
gem "activerecord-import", ">= 0.2.0"
gem 'ezcrypto'
gem 'thin'
gem 'exception_notification'
gem 'mail'
gem 'libv8', '~> 3.11.8.0'
gem "therubyracer", :require => 'v8'
gem 'jasmine', :group => [:development, :test]
gem 'sprockets'
gem 'jquery-rails'
gem 'tinymce-rails'
gem 'acts_as_list'
gem 'cocaine'
gem 'rmagick'
gem 'carrierwave'
gem 'remotipart'
gem 'deep_cloneable', '~> 1.4.0'
gem 'delayed_job_active_record'
gem 'daemons'
gem 'rb-readline'
gem "jquery-migrate-rails", "~> 1.0.0"
gem 'ransack'
# Gems used only for assets and not required
# in production environments by default.
group :assets do
gem 'sass-rails', "~> 3.2.3"
gem 'coffee-rails', "~> 3.2.1"
gem 'uglifier', '>= 1.0.3'
end
# 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 'cheat'
gem 'ruby-growl'
gem 'letter_opener'
gem 'rspec-rails', "~> 2.0"
gem 'database_cleaner'
gem 'rb-fsevent', '~> 0.9.1'
gem 'guard-rspec'
gem 'spork-rails'
gem 'guard-spork'
gem 'factory_girl_rails'
gem 'capybara', '2.0.1'
gem 'launchy'
gem 'mocha', :require => false
gem 'better_errors'
gem 'binding_of_caller'
gem 'meta_request'
end