it seems that you are missing cygserver.
I am just doing some testing of 8.0.4 vs 8.1.2 under cygwin and I get
the same when I forget cygserver.
After you install cygwin, do the following -
export CYGWIN=server (not clear if needed, try without it)
unset LANG (not clear if needed, try without it)
Then you do -
in the source directory.
export CYGWIN=server (makes initdb use the cygserver)
initdb -D /usr/local/pgsql/data
This should work.
pgsql-cygwin by date
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