Yeah I read that. It's kind of scary. I upgraded immediately, but I was already on 1.1.4.
I know I'm just trying to justify it, but it's good that it happened now. It's kind of an eye opener, and will make the core Rails team, and all Rails developers scrutinize the security stuff a lot more from now on.
As I keep stressing, Rails 1.0 was only release 6 months ago, so you're going to have to expect this kind of thing.
I wonder if a developer found it, or if someone was attacked?