David, when you upgraded AOLserver3, did you grab sources and build yourself a new one, or just grab binaries and then compile the Postgres driver gotten from elsewhere (say, our SourceForge page)?
Again, I downloaded AOLserver3 release sources (including the driver) and compiled it (and the driver) and it works just fine with PG7 and OpenACS. The makefile that comes down with the release sources has FOR_ACS_USE define that's needed (or is it embedded in postgres.c as a default? doesn't matter, it works).
So somewhere in this long train of events you've followed you've probably gotten a bogus makefile.
