Jeez, after only a LITTLE Google searching, I found not only the quote from Gould in question, but a nice analysis of HOW its used out of context.
So, from http://www.talkorigins.org/faqs/quotes/mine/part3.html...
(NOTE, JOHN, HOW I AM LINKING TO MY COMPLETE SOURCE HERE)
A more correct and complete citation is:
Gould, S. J. 1977. "Evolution's Erratic Pace" in Natural History 86(5):12-16.
This is the same article as:
Gould, S. J. 1980. "The Episodic Nature of Evolutionary Change" in The Panda's Thumb, pp. 179-185. New York: W. W. Norton & Company.
It shouldn't surprise those familiar with Gould's books that an article for the magazine Natural History would show up in one of his essay collections, but it is surprising that it has a different title and that there are some differences in the body of the article. And so, it's now obvious why the last sentence in the above is also in Quote #14 of the original Quote Mine Project. They both refer to the same article, and in fact appear in the same pages in "The Panda's Thumb" (pp. 181-182). John Wilkins certainly did more than an adequate job of clarifying Gould's beliefs in that entry, but a slightly different claim is being made here, so I'll do what I can.
A more complete quote would be as follows (words in square brackets () appear in the "Panda's Thumb" essay, and not in the original):
The extreme rarity of transitional forms in the fossil record persists as the trade secret of paleontology. The evolutionary trees that adorn our textbooks have data only at the tips and nodes of their branches; the rest is inference, however reasonable, not the evidence of fossils. Yet Darwin was so wedded to gradualism that he wagered his entire theory on a denial of this literal record:
<> (this is the subquote from darwin -ed)
Darwin's argument still persists as the favored escape of most paleontologists from the embarrassment of a record that seems to show so little of evolution [directly]. In exposing its cultural and methodological roots, I wish in no way to impugn the potential validity of gradualism (for all general views have similar roots). I only wish to point out that it is never "seen" in the rocks.
Paleontologists have paid an exorbitant price for Darwin's argument. We fancy ourselves as the only true students of life's history, yet to preserve our favored account of evolution by natural selection we view our data as so bad that we never see the very process we profess to study.
For several years, Niles Eldredge of the American Museum of Natural History and I have been advocating a resolution to this uncomfortable paradox. We believe that Huxley was right in his warning . The modern theory of evolution does not require gradual change. In fact, the operation of Darwinian processes should yield exactly what we see in the fossil record. [It is gradualism we should reject, not Darwinism.]
 Referring to Huxley's warning to Darwin, literally on the eve of the publication of Origin of Species, that "[y]ou have loaded yourself with an unnecessary difficulty in adopting Natura non facit saltum [nature does not make leaps] so unreservedly." - Ed.
So it would seem that Gould has no problems with the fossil record. But did he believe that transitional forms are lacking? Note that in the quote originally presented, the claim is made that they are rare, not absent. Also, as anyone who is familiar with Gould's writings will know, the text quoted reflects his recognition that, while there is a scarcity of transitional fossils between species, there is no such lack of transitional fossils between major groups.
Gould is obviously talking about puntuated equilibria versus gradualism, not the validity of the theory overall.
You're not alone here in trying to take Gould's quotes out of context. There's TONS of these on this web page. I had no idea that people desired to so misrepresent Gould as to search so hard for quotes like this and misrepresent them.