What is the best way to handle constants in Ruby when using Rails?

You can use an array or hash for this purpose (in your environment.rb):

OPTIONS = ['one', 'two', 'three']
OPTIONS = {:one => 1, :two => 2, :three => 3}

or alternatively an enumeration class, which allows you to enumerate over your constants as well as the keys used to associate them:

class Enumeration
  def Enumeration.add_item(key,value)
    @hash ||= {}
    @hash[key]=value
  end

  def Enumeration.const_missing(key)
    @hash[key]
  end   

  def Enumeration.each
    @hash.each {|key,value| yield(key,value)}
  end

  def Enumeration.values
    @hash.values || []
  end

  def Enumeration.keys
    @hash.keys || []
  end

  def Enumeration.[](key)
    @hash[key]
  end
end

which you can then derive from:

class Values < Enumeration
  self.add_item(:RED, '#f00')
  self.add_item(:GREEN, '#0f0')
  self.add_item(:BLUE, '#00f')
end

and use like this:

Values::RED    => '#f00'
Values::GREEN  => '#0f0'
Values::BLUE   => '#00f'

Values.keys    => [:RED, :GREEN, :BLUE]
Values.values  => ['#f00', '#0f0', '#00f']