Download the lastest MySQL Installer for windows 7 32 bits
Installed the gem with the following command: gem install mysql2 --platform=ruby -- '--with-mysql-dir="C:/Program Files/MySQL/MySQL Connector C 6.1 6.1.2/"'
One pitfall to be aware of is that I changed the backslashes (\) to normal slashes (/). I've tried the same procedure with backslashes and it didn't work.
The installer already includes the C connectors for MySQL at MySQL Connector C 6.1 6.1.2 directory. Therefore, passing only the --with-mysql-dir parameter without the --with-mysql-lib or --with-mysql-include parameters, makes the gem to look at the same directory for the lib and includedirectories
Another source of problem could be using 64 bit connector instead of 32 bit.
This may be evident from log files, like here: