Yes, currently you can't have password protection on your PG database used for OpenACS 4. PG's password mechanism and AOLserver's Tcl API don't play well together.
If you just remove the pgbin path as suggested, the copy of PSQL found on your PATH will be used, so if the PATH is set correctly you'll be in great shape.
I just did a fresh install yesterday with the latest CVS repository contents so I think Hafeez is on the right track.
