After upgrading to Rails 3 beta2 I started getting an error (undefined method config for NilClass) when running specs or tests using factory_girl.

This issue with factory_girl is is documented on the factory_girl github here. The issue occurs with a check at the end of factory_girl.rb. It currently reads "if defined? Rails.configuration" but should read "if defined? Rails.configuration and Rails.application". Unfortunately the thoughtbot team has not gotten around to fixing it so to solve it for now:

Edit your Gemfile thusly:

                  group(:test) do
                    gem 'factory_girl', :git => 'git://github.com/danielb2/factory_girl'
                  end
                  

This will source danielb2's fork which removes all the special setup for rails.

Next, edit your 'spec_helper' and add:

                  require 'factories'
                  

The offending file automatically required my spec/factories.rb file so it's no big deal to add this in manually.