In fact, in the case given you can do "select distinct upper(email)", which more correctly conveys the sense of the query anyway (the email address you give as your login name is always treated in a case-insensitive manner by the ACS).
The restriction that was added to PG 7.0 makes it standard compliant, and was added because earlier versions of PG actually gave incorrect results for certain flavors of "distinct ... order by" queries.
