What is a good blog engine that I can incorporate into my Ruby on Rails application?

The first question you need to ask is if you really need it to be Rails based. Given that you are looking for an engine rather than building the functionality you need usually indicates that you'd be better off using mature blogging software like Wordpress (or similar).

If you decide that you really do want to incorporate a blog engine, then check out The Ruby Toolbox's Blog Engines guide. It gives a good overview on what's available.