There is no gem command to remove an application at the moment - so as to prevent accidental database drops.
However you can follow this procedure to delete an application deployed with the gem
RAILS_ENV=production rake db:drop
from the current release directory.
/home/railsfind /etc -name 'rails-{yourappname}*' -print
and remove the files found corresponding to your application.
cap deploy:monit:reload
cap deploy:web:reload