After a bit of Googling, I came across this forum. I found my solution to install Ruby 1.8.7 on RVM.
Install readline package
(rvm package install readline)
Remove prior ruby installation
(rvm remove 1.8.7)
Install ruby 1.8.7 with CONFIGURE option
(rvm install 1.8.7 -C --with-readline-dir=$HOME/.rvm/usr)
Finally, I had something running on RVM. :)