Thank You. I think it works :-)

Since I am new with this, I am documenting the process for your verification.
I found it fairly involved, if you know a more efficient way, glad to hear it :-)

1) downloaded you version to my local system (I could have avoided that)

```bash
peterv@ASUS:~/b/github/kennyj$ git clone git://github.com/kennyj/rails.git
...
actually, this is master ... I need a different branch :-p

peterv@ASUS:~/b/github/kennyj/rails$ git checkout -t origin/fix_4749
Branch fix_4749 set up to track remote branch fix_4749 from origin.
Switched to a new branch 'fix_4749'

peterv@ASUS:~/b/github/kennyj/rails$ git log -1 | cat
commit 8bf3c6d8165fa6442b3ae2f86a955c82d0abf99b
Author: kennyj <kennyj@gmail.com>
Date:   Wed Feb 1 02:44:06 2012 +0900

    Fix GH #4749. Remove branch options, because edge is not 3-2-stable.
...
peterv@ASUS:~/b/github/kennyj/rails$ git branch -d master
warning: deleting branch 'master' that has been merged to
         'refs/remotes/origin/master', but it is not yet merged to HEAD.
Deleted branch master (was 2ba3d13).

peterv@ASUS:~/b/github/kennyj/rails$ git branch
* fix_4749

peterv@ASUS:~/b/github/kennyj/rails$ git diff HEAD~1.. | cat
diff --git a/railties/lib/rails/generators/app_base.rb b/railties/lib/rails/generators/app_base.rb
index 0a73271..aadb8b9 100644
--- a/railties/lib/rails/generators/app_base.rb
+++ b/railties/lib/rails/generators/app_base.rb
@@ -200,8 +200,8 @@ module Rails
             # Gems used only for assets and not required
             # in production environments by default.
             group :assets do
-              gem 'sass-rails',   :git => 'git://github.com/rails/sass-rails.git',   :branch => '3-2-stable'
-              gem 'coffee-rails', :git => 'git://github.com/rails/coffee-rails.git', :branch => '3-2-stable'
+              gem 'sass-rails',   :git => 'git://github.com/rails/sass-rails.git'
+              gem 'coffee-rails', :git => 'git://github.com/rails/coffee-rails.git'
... (more changes)
```

2) Then created a regular 3.2.1 project (but without bundle install).

Then changed the Gemfile to look like this:

```ruby
source 'https://rubygems.org'

gem 'rails', :path => '/home/peterv/b/github/kennyj/rails'

gem 'pg'

group :assets do
  gem 'sass-rails'
  gem 'coffee-rails'

  # See https://github.com/sstephenson/execjs#readme for more supported runtimes
  gem 'therubyracer'

  gem 'uglifier'
end

gem 'jquery-rails'
```

3) Made a gemset for this and installed the gems for this Gemfile in it:

```bash
peterv@ASUS:~/data/temp/gh4749$ rvm current
ruby-1.9.3-p0@gh4749

peterv@ASUS:~/data/temp/gh4749$ bundle install
Fetching source index for https://rubygems.org/
Using rake (0.9.2.2) 
Installing i18n (0.6.0) 
Installing multi_json (1.0.4) 
Using activesupport (3.2.1) from source at /home/peterv/b/github/kennyj/rails 
Installing builder (3.0.0) 
Using activemodel (3.2.1) from source at /home/peterv/b/github/kennyj/rails 
Installing erubis (2.7.0) 
Installing journey (1.0.1) 
Installing rack (1.4.1) 
Installing rack-cache (1.1) 
Installing rack-test (0.6.1) 
Installing hike (1.2.1) 
Installing tilt (1.3.3) 
Installing sprockets (2.1.2) 
Using actionpack (3.2.1) from source at /home/peterv/b/github/kennyj/rails 
Installing mime-types (1.17.2) 
Installing polyglot (0.3.3) 
Installing treetop (1.4.10) 
Installing mail (2.4.1) 
Using actionmailer (3.2.1) from source at /home/peterv/b/github/kennyj/rails 
Installing arel (3.0.0) 
Installing tzinfo (0.3.31) 
Using activerecord (3.2.1) from source at /home/peterv/b/github/kennyj/rails 
Using activeresource (3.2.1) from source at /home/peterv/b/github/kennyj/rails 
Using bundler (1.0.21) 
Installing coffee-script-source (1.2.0) 
Installing execjs (1.3.0) 
Installing coffee-script (2.2.0) 
Installing rack-ssl (1.3.2) 
Installing json (1.6.5) with native extensions 
Installing rdoc (3.12) 
Installing thor (0.14.6) 
Using railties (3.2.1) from source at /home/peterv/b/github/kennyj/rails 
Installing coffee-rails (3.2.2) 
Installing jquery-rails (2.0.0) 
Installing libv8 (3.3.10.4) 
Installing pg (0.12.2) with native extensions 
Using rails (3.2.1) from source at /home/peterv/b/github/kennyj/rails 
Installing sass (3.1.12) 
Installing sass-rails (3.2.4) 
Installing therubyracer (0.9.9) with native extensions 
Installing uglifier (1.2.3) 
Your bundle is complete! Use `bundle show [gemname]` to see where a bundled gem is installed.

peterv@ASUS:~/data/temp/gh4749$ cat Gemfile.lock 
PATH
  remote: /home/peterv/b/github/kennyj/rails
  specs:
    actionmailer (3.2.1)
      actionpack (= 3.2.1)
      mail (~> 2.4.0)
    actionpack (3.2.1)
      activemodel (= 3.2.1)
      activesupport (= 3.2.1)
      builder (~> 3.0.0)
      erubis (~> 2.7.0)
      journey (~> 1.0.1)
      rack (~> 1.4.0)
      rack-cache (~> 1.1)
      rack-test (~> 0.6.1)
      sprockets (~> 2.1.2)
    activemodel (3.2.1)
      activesupport (= 3.2.1)
      builder (~> 3.0.0)
    activerecord (3.2.1)
      activemodel (= 3.2.1)
      activesupport (= 3.2.1)
      arel (~> 3.0.0)
      tzinfo (~> 0.3.29)
    activeresource (3.2.1)
      activemodel (= 3.2.1)
      activesupport (= 3.2.1)
    activesupport (3.2.1)
      i18n (~> 0.6)
      multi_json (~> 1.0)
    rails (3.2.1)
      actionmailer (= 3.2.1)
      actionpack (= 3.2.1)
      activerecord (= 3.2.1)
      activeresource (= 3.2.1)
      activesupport (= 3.2.1)
      bundler (~> 1.0)
      railties (= 3.2.1)
    railties (3.2.1)
      actionpack (= 3.2.1)
      activesupport (= 3.2.1)
      rack-ssl (~> 1.3.2)
      rake (>= 0.8.7)
      rdoc (~> 3.4)
      thor (~> 0.14.6)

GEM
  remote: https://rubygems.org/
  specs:
    arel (3.0.0)
    builder (3.0.0)
    coffee-rails (3.2.2)
      coffee-script (>= 2.2.0)
      railties (~> 3.2.0)
    coffee-script (2.2.0)
      coffee-script-source
      execjs
    coffee-script-source (1.2.0)
    erubis (2.7.0)
    execjs (1.3.0)
      multi_json (~> 1.0)
    hike (1.2.1)
    i18n (0.6.0)
    journey (1.0.1)
    jquery-rails (2.0.0)
      railties (>= 3.2.0.beta, < 5.0)
      thor (~> 0.14)
    json (1.6.5)
    libv8 (3.3.10.4)
    mail (2.4.1)
      i18n (>= 0.4.0)
      mime-types (~> 1.16)
      treetop (~> 1.4.8)
    mime-types (1.17.2)
    multi_json (1.0.4)
    pg (0.12.2)
    polyglot (0.3.3)
    rack (1.4.1)
    rack-cache (1.1)
      rack (>= 0.4)
    rack-ssl (1.3.2)
      rack
    rack-test (0.6.1)
      rack (>= 1.0)
    rake (0.9.2.2)
    rdoc (3.12)
      json (~> 1.4)
    sass (3.1.12)
    sass-rails (3.2.4)
      railties (~> 3.2.0)
      sass (>= 3.1.10)
      tilt (~> 1.3)
    sprockets (2.1.2)
      hike (~> 1.2)
      rack (~> 1.0)
      tilt (~> 1.1, != 1.3.0)
    therubyracer (0.9.9)
      libv8 (~> 3.3.10)
    thor (0.14.6)
    tilt (1.3.3)
    treetop (1.4.10)
      polyglot
      polyglot (>= 0.3.1)
    tzinfo (0.3.31)
    uglifier (1.2.3)
      execjs (>= 0.3.0)
      multi_json (>= 1.0.2)

PLATFORMS
  ruby

DEPENDENCIES
  coffee-rails
  jquery-rails
  pg
  rails!
  sass-rails
  therubyracer
  uglifier
```

4) Checking the railties in this gemset:

```
peterv@ASUS:~/data/temp/gh4749$ grep sass-rails.git /home/peterv/b/github/kennyj/rails/railties/lib/rails/generators/app_base.rb
              gem 'sass-rails',   :git => 'git://github.com/rails/sass-rails.git'
```

5) Copying the Gemfile and .rvmrc in a new directory and moving there.

```
peterv@ASUS:~/data/temp/gh4749$ cd ..
peterv@ASUS:~/data/temp$ mkdir test_fix_4749
peterv@ASUS:~/data/temp$ cp gh4749/Gemfile test_fix_4749/
peterv@ASUS:~/data/temp$ cp gh4749/Gemfile.lock test_fix_4749/
peterv@ASUS:~/data/temp$ cp gh4749/.rvmrc test_fix_4749/
peterv@ASUS:~/data/temp$ cd test_fix_4749
= NOTICE                                                                     =
...
Do you wish to trust this .rvmrc file? (/home/peterv/data/temp/test_fix_4749/.rvmrc)
y[es], n[o], v[iew], c[ancel]> v

rvm use --create 1.9.3@gh4749

/home/peterv/data/temp/test_fix_4749/.rvmrcDo you wish to trust this .rvmrc file? (/home/peterv/data/temp/test_fix_4749/.rvmrc)
y[es], n[o], v[iew], c[ancel]> y
Using /home/peterv/.rvm/gems/ruby-1.9.3-p0 with gemset gh4749
```

6) Now trying the `rails new myapp --edge` fingers crossed

```
peterv@ASUS:~/data/temp/test_fix_4749$ bundle exec rails new myapp --edge 
Using --skip-bundle -T -d postgresql from /home/peterv/.railsrc
      create  
      create  README.rdoc
      create  Rakefile
      create  config.ru
      create  .gitignore
      create  Gemfile
#########################  [added locally by @petervandenabeele]
in assets_gemfile_entry           [added locally by @petervandenabeele]
#########################  [added locally by @petervandenabeele]
      create  app
      create  app/assets/images/rails.png
      create  app/assets/javascripts/application.js
      create  app/assets/stylesheets/application.css
      create  app/controllers/application_controller.rb
      create  app/helpers/application_helper.rb
      create  app/mailers
      create  app/models
      create  app/views/layouts/application.html.erb
      create  app/mailers/.gitkeep
      create  app/models/.gitkeep
      create  config
      create  config/routes.rb
      create  config/application.rb
      create  config/environment.rb
      create  config/environments
      create  config/environments/development.rb
      create  config/environments/production.rb
      create  config/environments/test.rb
      create  config/initializers
      create  config/initializers/backtrace_silencers.rb
      create  config/initializers/inflections.rb
      create  config/initializers/mime_types.rb
      create  config/initializers/secret_token.rb
      create  config/initializers/session_store.rb
      create  config/initializers/wrap_parameters.rb
      create  config/locales
      create  config/locales/en.yml
      create  config/boot.rb
      create  config/database.yml
      create  db
      create  db/seeds.rb
      create  doc
      create  doc/README_FOR_APP
      create  lib
      create  lib/tasks
      create  lib/tasks/.gitkeep
      create  lib/assets
      create  lib/assets/.gitkeep
      create  log
      create  log/.gitkeep
      create  public
      create  public/404.html
      create  public/422.html
      create  public/500.html
      create  public/favicon.ico
      create  public/index.html
      create  public/robots.txt
      create  script
      create  script/rails
      create  tmp/cache
      create  tmp/cache/assets
      create  vendor/assets/javascripts
      create  vendor/assets/javascripts/.gitkeep
      create  vendor/assets/stylesheets
      create  vendor/assets/stylesheets/.gitkeep
      create  vendor/plugins
      create  vendor/plugins/.gitkeep

peterv@ASUS:~/data/temp/test_fix_4749$ cd myapp/
peterv@ASUS:~/data/temp/test_fix_4749/myapp$ cat Gemfile 
source 'https://rubygems.org'

gem 'rails',     :git => 'git://github.com/rails/rails.git'
gem 'journey',   :git => 'git://github.com/rails/journey.git'
gem 'arel',      :git => 'git://github.com/rails/arel.git'

gem 'pg'


# Gems used only for assets and not required
# in production environments by default.
group :assets do
  gem 'sass-rails',   :git => 'git://github.com/rails/sass-rails.git'
  gem 'coffee-rails', :git => 'git://github.com/rails/coffee-rails.git'

  # See https://github.com/sstephenson/execjs#readme for more supported runtimes
  # gem 'therubyracer'

  gem 'uglifier', '>= 1.0.3'
end

gem 'jquery-rails'

# To use ActiveModel has_secure_password
# gem 'bcrypt-ruby', '~> 3.0.0'

# To use Jbuilder templates for JSON
# gem 'jbuilder'

# Use unicorn as the web server
# gem 'unicorn'

# Deploy with Capistrano
# gem 'capistrano'

# To use debugger
# gem 'ruby-debug19', :require => 'ruby-debug'
```

This seems OK.

7) Trying to do bundle install and some rake tests in the myapp project

```
peterv@ASUS:~/data/temp/test_fix_4749/myapp$ vim Gemfile 
peterv@ASUS:~/data/temp/test_fix_4749/myapp$ vim .rvmrc
peterv@ASUS:~/data/temp/test_fix_4749/myapp$ cd ..
peterv@ASUS:~/data/temp/test_fix_4749$ cd myapp/
= NOTICE                                                                     =
y[es], n[o], v[iew], c[ancel]> v


rvm use myapp@1.9.3

/home/peterv/data/temp/test_fix_4749/myapp/.rvmrc
Do you wish to trust this .rvmrc file? (/home/peterv/data/temp/test_fix_4749/myapp/.rvmrc)
y[es], n[o], v[iew], c[ancel]> y
Using /home/peterv/.rvm/gems/ruby-1.9.3-p0 with gemset 1.9.3

peterv@ASUS:~/data/temp/test_fix_4749/myapp$ bundle install
Updating git://github.com/rails/rails.git
Updating git://github.com/rails/journey.git
Updating git://github.com/rails/arel.git
Updating git://github.com/rails/sass-rails.git
Updating git://github.com/rails/coffee-rails.git
Fetching source index for https://rubygems.org/
Using rake (0.9.2.2) 
Installing i18n (0.6.0) 
Installing multi_json (1.0.4) 
Using activesupport (4.0.0.beta) from git://github.com/rails/rails.git (at master) 
Installing builder (3.0.0) 
Using activemodel (4.0.0.beta) from git://github.com/rails/rails.git (at master) 
Installing erubis (2.7.0) 
Using journey (1.0.1.20120126102309) from git://github.com/rails/journey.git (at master) 
Installing rack (1.4.1) 
Installing rack-cache (1.1) 
Installing rack-test (0.6.1) 
Installing hike (1.2.1) 
Installing tilt (1.3.3) 
Installing sprockets (2.2.0) 
Using actionpack (4.0.0.beta) from git://github.com/rails/rails.git (at master) 
Installing mime-types (1.17.2) 
Installing polyglot (0.3.3) 
Installing treetop (1.4.10) 
Installing mail (2.4.1) 
Using actionmailer (4.0.0.beta) from git://github.com/rails/rails.git (at master) 
Using arel (3.0.0.20120112113618) from git://github.com/rails/arel.git (at master) 
Installing tzinfo (0.3.31) 
Using activerecord (4.0.0.beta) from git://github.com/rails/rails.git (at master) 
Using activeresource (4.0.0.beta) from git://github.com/rails/rails.git (at master) 
Using bundler (1.0.21) 
Installing coffee-script-source (1.2.0) 
Installing execjs (1.3.0) 
Installing coffee-script (2.2.0) 
Installing rack-ssl (1.3.2) 
Installing json (1.6.5) with native extensions 
Installing rdoc (3.12) 
Installing thor (0.14.6) 
Using railties (4.0.0.beta) from git://github.com/rails/rails.git (at master) 
Using coffee-rails (3.2.0) from git://github.com/rails/coffee-rails.git (at master) 
Installing jquery-rails (2.0.0) 
Installing libv8 (3.3.10.4) 
Installing pg (0.12.2) with native extensions 
Using rails (4.0.0.beta) from git://github.com/rails/rails.git (at master) 
Installing sass (3.1.12) 
Using sass-rails (4.0.0.beta) from git://github.com/rails/sass-rails.git (at master) 
Installing therubyracer (0.9.9) with native extensions 
Installing uglifier (1.2.3) 
Your bundle is complete! Use `bundle show [gemname]` to see where a bundled gem is installed.

peterv@ASUS:~/data/temp/test_fix_4749/myapp$ vim config/database.yml 

peterv@ASUS:~/data/temp/test_fix_4749/myapp$ rake db:create 
peterv@ASUS:~/data/temp/test_fix_4749/myapp$ rake environment
DEPRECATION WARNING: config.whiny_nils option is deprecated and no longer works. (called from block in <top (required)> at /home/peterv/data/temp/test_fix_4749/myapp/config/environments/development.rb:10)
peterv@ASUS:~/data/temp/test_fix_4749/myapp$ rails c
/home/peterv/.rvm/rubies/ruby-1.9.3-p0/lib/ruby/site_ruby/1.9.1/rubygems/dependency.rb:247:in `to_specs': Could not find railties (>= 0) amongst [builder-3.0.0, bundler-1.0.21, coffee-script-2.2.0, coffee-script-source-1.2.0, erubis-2.7.0, execjs-1.3.0, hike-1.2.1, i18n-0.6.0, jquery-rails-2.0.0, json-1.6.5, libv8-3.3.10.4-x86-linux, mail-2.4.1, mime-types-1.17.2, multi_json-1.0.4, pg-0.12.2, polyglot-0.3.3, rack-1.4.1, rack-cache-1.1, rack-ssl-1.3.2, rack-test-0.6.1, rake-0.9.2.2, rdoc-3.12, sass-3.1.12, sprockets-2.2.0, therubyracer-0.9.9, thor-0.14.6, tilt-1.3.3, treetop-1.4.10, tzinfo-0.3.31, uglifier-1.2.3] (Gem::LoadError)
	from /home/peterv/.rvm/rubies/ruby-1.9.3-p0/lib/ruby/site_ruby/1.9.1/rubygems/dependency.rb:256:in `to_spec'
	from /home/peterv/.rvm/rubies/ruby-1.9.3-p0/lib/ruby/site_ruby/1.9.1/rubygems.rb:1210:in `gem'
	from /home/peterv/.rvm/gems/ruby-1.9.3-p0@1.9.3/bin/rails:18:in `<main>'

peterv@ASUS:~/data/temp/test_fix_4749/myapp$ bundle exec rails c
DEPRECATION WARNING: config.whiny_nils option is deprecated and no longer works. (called from block in <top (required)> at /home/peterv/data/temp/test_fix_4749/myapp/config/environments/development.rb:10)
Loading development environment (Rails 4.0.0.beta)
001:0> quit
```