After much messing about with the gemfile, each gemfile alteration simply causing different problems with loading the binaries for a different gem. So not an issue specific to redcloth.
I came across this SO post: What is the purpose of vendor/bundle? Heroku tells me to remove it
This use of --path is certainly not an elegant solution, my app never needed this before - something must have changed in Heroku and I'm hoping to be able to move away from this in future. But it's fixed it for now and that's good enough for me.