I was frustrated by this for some time, but finally found a solution.
In my situation the problem was with "DELIMITER", which is a command only used by the mysql command line client. It's not part of the API, which is what the mysql gem is using.
SOURCE: https://github.com/opscode-cookbooks/database/issues/75
To restore from the dump I use this function in the recipe:
execute 'restore-databases' do command "mysql -u root -p# -D databaseName < /path/to_dump.sql" end