Huh, why should it be a problem with more than 8,000 rows? Is something not indexed that should be indexed? Or is there an index that shouldn't be there? (updating indices takes time, too).
Have you tried running the postmaster with "-F". The stops the fsynch that follows every insert/update query. Chat does a lot of updates. If this speeds things up, you'll know this is the cause.
Using "-F" is unsafe and you should really only test with this flag. If it helps, though, it will tell you that PG 7.1 will help you a lot, because insert/updates are much, much faster in PG 7.1. If "-F" helps, start planning your upgrade to PG 7.1 ASAP.
