Hi Melody. If you're running Postgresql, you may wanna look at updating to a newer version, as 7.0.1 is VERY old and no longer supported.
Anyway, as for the permissions, if you can connect as the superuser (usually named postgres) then you should be able to back up your database. Just set the entry for your machine in pg_hba.conf to trust, and connect like so: 'psql -h hostname -U postgres' and you should then be able to do what you want. To backup your database, do 'pg_dump -h hostname dbname -U postgres' and you should be able to back it up.
Indexes will help. Stick to the stock btree indexes since hash indexes, especially back in the 7.0 branch and before, had some serious performance issues.