Ahh the "CREATE SEQUENCE ... START WITH ..." syntax is supported in PostgreSQL versions 7.4 and above. Our strategy with PostgreSQL support is to support the current major version (8.0.x at the moment) and the immediately older major version (7.4.x). Actually PG's up to 8.1 but there are some compatibility issues with OpenACS that won't be fixed for 5.2.
So our "official support" is for 8.0.x and 7.4.x.
It's great that removing the "WITH" allows installation of the kernel under PG 7.3.x, but there may be other problems.
PostgreSQL improves markedly with each major version release, I'd highly recommend you upgrade to 7.4.x at least, if at all possible ...
