I was able solve the problem:
What helped me was turn drush into debug mode by adding flag '--debug'
That showed me that pdo extensions were not loaded
It end up that my new PHP5.4 upgrade compiled from source had issues. Reinstalled PHP 5.4 this time with macports as described in https://gist.github.com/2721719
Afterwards, to make sure php-cli is pointing to the new php.ini run 'php -i | grep php.ini'. This is important because drush uses the php-cli configurations that may point to old php.ini
To make sure all of the extensions are loading properly run 'php -v' which will show issues if there is any before displaying the actual version that you can also validate if your upgrade is inline with php-cli
At last, to make drush work with my new PHP 5.4 upgrade, i needed to remove drush and install again. Drush 5.8 works fine with PHP 5.4 so far. However, I needed to create a symbolic link to make it work. It was looking for drush.php in the wrong directory. Used 'locate drush.php' to find the right drush.php link to.
I hope this is helpful. Thanks to community with so much info out there