Set up a support request with MT to get access to their MySQL update tool. They’ll try to talk you into starting a new (gs) service, which is just nuts, but ignore that. It will upgrade you to MySQL 5.1.x and then the WP 3.2 update will finish.
It should be noted that one of the Core devs saw my Twitter exchange with MT support and wholeheartedly dismissed the possibility that their MySQL version checking was wrong. I’m not sure who to believe, but the other weird thing that happened was that the MT support rep who was helping me told me I was running MySQL 4-point-whatever. I sent them a screenshot from phpMyAdmin indicating the contrary and “upon further investigation” they then said I was running MySQL 5.0. I have my suspicions about how MT may be handling MySQL server/client versioning and it’s my theory that this is the root of the problem. They were helpful enough getting it resolved (and I must add that contacting them via Twitter and then going through the standard ticketing system speeds turnaround on resolutions dramatically).