Deadlock Issue with PostgreSQL

Background: We are running a web application on apache with database
server as PostgreSQL. The application is a expense claim application
with workflow. The software versions are specified below:

Red Hat Linux release 7.3

Apache 1.3.20

PostgreSQL 7.1.3

Problem: When the application is accessed by many users like say 40, the
PostgreSQL database freezes.

Description of Process happening behind: The application mainly puts
load on one table (worklist) where the steps were created for each
expense claim initiated. While creating each step for claim there is
exclusive row lock and at the end inserts a new step. Both these
statements are in one transaction. When the apache hangs in between the
deadlock remains. In this way there are many deadlocks created which
makes the database to finally freeze. To resolve this we were restarting
the PostgreSQl db. Sometime the apache also hangs. Then we were
restarting the apache. There is no log created in postgreSQL. Whereas
our application records an error log: 'Failed to gain exclusive table
row lock'

We were guessing that the database hanging is due to deadlock issue. But
not sure of it.

I have attached the postgreSQL.conf file for your reference to check the
settings.

Please let me know what might be the reason and how to check and resolve
it.

Thanks and Best Regards,

Anu