Actually I received the same error message and fixed it with the method described by druid.
I guess it could be two distinctive issues. After you copied the latest rtg.library out of Amiga Programs to Libs: , are you still getting the same warning message? If yes, you probably didn't copy the file to the appropriate location or the copy went wrong, try again, it may definitely cure the problem. If you're not receiving the warning but WB still crashes, the two issues are not linked and probably your MagicWB installation went wrong and corrupted your workbench. I would indeed recommend to try again from scratch...
After you've installed WB3.1, make a backup of your Workbench3.1.hdf file from the hard-disk folder you created, so you don't have to go through all of this again! If anything goes wrong just replace it with your backup and you have a new WB to mess up with
Good luck