I managed to get psql to work. Actually it is already working. I just need to tell Windows where to find it. I added 'c:cygwinin' to my PATH in autoexec.bat and the installation script start creating the database tables.
I now have a new problem though. About half way through, Postgres hung and I got the following error:
pq_recvbuf: recv() failed: error 0
Looks to me like a Postgres problem. Anyone know how to fix this?