Problem with query, server totally unresponsive

Hello, I have a big problem with one of my databases. When i run my
query, after a few minutes, the postmaster shows 99% mem i top, and
the server becomes totally unresponsive.

I get this message when I try to cancel the query:

server closed the connection unexpectedly
This probably means the server terminated abnormally
before or while processing the request.
The connection to the server was lost. Attempting reset: Failed.

This works fine on a different machine with the same database
settings and about 30% less records. The other machine is running
PostgreSQL 8.0.3
The troubled one is running 8.1.2

Any help is greatly appreciated!

Thanks

The machine has 2x Intel dual core processors (3GHz) and 2 Gigs of ram.

#-----------------------------------------------------------------------
----
# RESOURCE USAGE (except WAL)
#-----------------------------------------------------------------------
----

# - Memory -

shared_buffers = 8192 # min 16 or
max_connections*2, 8KB each
#temp_buffers = 1000 # min 100, 8KB each
#max_prepared_transactions = 5 # can be 0 or more
# note: increasing max_prepared_transactions costs ~600 bytes of
shared memory
# per transaction slot, plus lock space (see max_locks_per_transaction).
work_mem = 4096 # min 64, size in KB
maintenance_work_mem = 262144 # min 1024, size in KB
#max_stack_depth = 2048 # min 100, size in KB

My query:

SELECT r.id AS id, max(r.name) AS name, max(companyid) AS companyid,
max(extract(epoch from r.updated)) as r_updated, hydra.join(co.value)
AS contacts, hydra.join(ad.postalsite) AS postalsites FROM records r
LEFT OUTER JOIN contacts co ON(r.id = co.record AND co.type IN
(1,11,101,3)) LEFT OUTER JOIN addresses ad ON(r.id = ad.record) WHERE
r.original IS NULL GROUP BY r.id;

The hydra.join function
-- Aggregates a column to an array

DROP FUNCTION hydra.join_aggregate(text, text) CASCADE;
DROP FUNCTION hydra.join_aggregate_to_array(text);

CREATE FUNCTION hydra.join_aggregate(text, text) RETURNS text
AS 'select $1 || ''|'' || $2'
LANGUAGE sql IMMUTABLE STRICT;

CREATE FUNCTION hydra.join_aggregate_to_array(text) RETURNS text[]
AS 'SELECT string_to_array($1, ''|'')'
LANGUAGE sql IMMUTABLE STRICT;

CREATE AGGREGATE hydra.join (
BASETYPE = text
,SFUNC = hydra.join_aggregate
,STYPE = text
,FINALFUNC = hydra.join_aggregate_to_array
);

Tables:
records: 757278 rows
contacts: 2256253 rows
addresses: 741536 rows

Explain:

QUERY PLAN
------------------------------------------------------------------------
-----------------------------
GroupAggregate (cost=636575.63..738618.40 rows=757278 width=75)
-> Merge Left Join (cost=636575.63..694469.65 rows=1681120
width=75)
Merge Cond: ("outer".id = "inner".record)
-> Merge Left Join (cost=523248.93..552247.54
rows=1681120 width=63)
Merge Cond: ("outer".id = "inner".record)
-> Sort (cost=164044.73..165937.93 rows=757278
width=48)
Sort Key: r.id
-> Seq Scan on records r (cost=0.00..19134.78
rows=757278 width=48)
Filter: (original IS NULL)
-> Sort (cost=359204.20..363407.00 rows=1681120
width=19)
Sort Key: co.record
-> Seq Scan on contacts co
(cost=0.00..73438.06 rows=1681120 width=19)
Filter: (("type" = 1) OR ("type" = 11) OR
("type" = 101) OR ("type" = 3))
-> Sort (cost=113326.70..115180.54 rows=741536 width=16)
Sort Key: ad.record
-> Seq Scan on addresses ad (cost=0.00..20801.36
rows=741536 width=16)
(16 rows)

se_companies=# \d records;
Table "public.records"
Column | Type |
Modifiers
-----------------+--------------------------
+------------------------------------------------------
id | integer | not null default nextval
('records_id_seq'::regclass)
companyid | character varying(16) | default ''::character
varying
categories | integer[] |
nace | integer[] |
name | character varying(255) | default ''::character
varying
updated | timestamp with time zone | default
('now'::text)::timestamp(6) with time zone
updater | integer |
owner | integer |
loaner | integer |
info | text |
original | integer |
active | boolean | default true
categoryquality | integer | not null default 0
searchwords | character varying(128)[] |
priority | integer |
categorized | timestamp with time zone |
infopage | boolean |
national | boolean |
password | character varying(32) |
login | boolean |
deleted | boolean | not null default false
reference | integer[] |
nuinfo | text |
brands | integer[] |
volatile | boolean | not null default false
Indexes:
"records_pkey" PRIMARY KEY, btree (id) CLUSTER
"original_is_null" btree (original) WHERE original IS NULL
"records_category_rdtree_idx" gist (categories)
"records_categoryquality_idx" btree (categoryquality)
"records_lower_name_idx" btree (lower(name::text))
"records_original_idx" btree (original)
"records_owner" btree ("owner")
"records_updated_idx" btree (updated)
Foreign-key constraints:
"records_original_fkey" FOREIGN KEY (original) REFERENCES records
(id)

se_companies=# \d contacts;
Table "public.contacts"
Column | Type | Modifiers
-------------+------------------------
+-------------------------------------------------------
id | integer | not null default nextval
('contacts_id_seq'::regclass)
record | integer |
type | integer |
value | character varying(128) |
description | character varying(255) |
priority | integer |
itescotype | integer |
original | integer |
source | integer |
reference | character varying(32) |
quality | integer |
deleted | boolean | not null default false
searchable | boolean | not null default true
visible | boolean | not null default true
Indexes:
"contacts_pkey" PRIMARY KEY, btree (id)
"contacts_original_idx" btree (original)
"contacts_quality_idx" btree (quality)
"contacts_record_idx" btree (record)
"contacts_source_reference_idx" btree (source, reference)
"contacts_value_idx" btree (value)
Foreign-key constraints:
"contacts_original_fkey" FOREIGN KEY (original) REFERENCES
contacts(id)

se_companies=# \d addresses;
Table "public.addresses"
Column | Type |
Modifiers
--------------+--------------------------
+--------------------------------------------------------
id | integer | not null default nextval
('addresses_id_seq'::regclass)
record | integer |
address | character varying(128) |
extra | character varying(32) |
postalcode | character varying(16) |
postalsite | character varying(64) |
description | character varying(255) |
position | point |
uncertainty | integer | default 99999999
priority | integer |
type | integer |
place | character varying(64) |
floor | integer |
side | character varying(8) |
housename | character varying(64) |
original | integer |
source | integer |
reference | character varying(64) |
quality | integer |
deleted | boolean | not null default false
searchable | boolean | not null default true
visible | boolean | not null default true
municipality | integer |
map | boolean | not null default true
geocoded | timestamp with time zone | default now()
Indexes:
"addresses_pkey" PRIMARY KEY, btree (id)
"addresses_lower_address_postalcode" btree (lower
(address::text), lower(postalcode::text))
"addresses_original_idx" btree (original)
"addresses_record_idx" btree (record)
"addresses_source_reference_idx" btree (source, reference)
Foreign-key constraints:
"addresses_original_fkey" FOREIGN KEY (original) REFERENCES
addresses(id)