Yes, this is because PHP wasn't compiled with PostgreSQL support.
Modern distributions make it very easy. Just add the appropriate .RPM (or .DEB to avoid a flame war).
Noting that you are back quite a few versions on PHP, Apache, PostgreSQL, and Linux, might I suggest getting a later distribution, such as Mandrake 8.1, which is optimized out-of-the box and is pretty current?
You'd also do well to upgrade your file system, if you haven't already, to a journaled file system like Reiser-FS (preferred) or ext3 (easier to upgrade and compatible to ext2).