Lazy Perfectionist, I think you are really wrong. I think the correct version is you can only spend one gem to raise your caster level. Additional gems still reduce fatigue.
KristofferO said:
You are on track. Max nbr of gems are mage lvl. This includes casting cost and increase lvl cost.
thejeffs example is correct.
Furthermore:
A mage can only use one gem to empower himself during a casting. This is the only way for him to reduce fatigue. He will not use more gems then one to reduce fatigue, and fatigue is only reduced as a side effect of him being temporarily more powerful.