It could be that there was a previous Ruby env installed on your system prior to your installation of 2.0? This might have had an existing GEM_PATH that lead to the /1.8 directory which the installation of version 2.0 simply kept.
The problem you where likely having, then, was that Passenger/Apache was looking in the /2.0 directory when in fact the gems were in the /1.8 directory. Your explicitly telling apache to use the /1.8 directory thus makes sense to fix the problem.
SetEnv GEM_HOME /usr/lib/ruby/gems/1.8
You might also try using the Ruby Version Manager to handle multiple Ruby envs.
Some things I found in Google: