Upgrading to 8.4

Hello,

Upgrading from 8.3 to 8.4 on a Mandriva distro.

I downloaded the source and unpacked. I tried to follow the short
instructions in the INSTALL file to the letter.

As root (first mistake?) I configured, compiled and installed
taking the default location for data and binaries,
Switched user to postgres & created the directories as instructed.
Started the server.
Server is running.
As postgres, I can run psql and connect to the server.

But I am encountering some problems, the most basic one being permission
issues.

For example, postgres can't do a pg_dump (even though it could start the
server),

bash$ pg_dump > pg_dump_test.sql
bash$ pg_dump_test.sql: permission denied

I am thinking this is a write permissions issue in the directory he is
in but I can't be sure because he can write to his .psql_history file in
the same directory.

Mandriva's location for things was:

data /var/lib/pgsql
binaries /usr/bin
postgres' home /var/lib/pgsql

When setting this up I retained the practice of having postres' home the
working directory of the server

/usr/local/pgsql:

So an ls -la in this area looks like so:

********************************************************
Sun Feb 21 20:01:20
root on pts/5 barney2.test.lcl:/usr/local/pgsql
# l
total 78656
drwxr-xr-x 7 root root 4096 2010-02-21 19:14 .
drwxr-xr-x 13 root root 4096 2010-02-21 17:12 ..
-rw-r--r-- 1 postgres postgres 467 2010-02-21 19:08 .bash_profile
drwxr-xr-x 2 root root 4096 2010-02-21 17:13 bin
drwx------ 11 postgres root 4096 2010-02-21 18:09 data
drwxr-xr-x 6 root root 4096 2010-02-21 17:13 include
drwxr-xr-x 3 root root 4096 2010-02-21 17:13 lib
-rw-r--r-- 1 postgres postgres 80419764 2010-02-21 19:26
pg_dumpall_20100219.sql
-rw-r--r-- 1 postgres postgres 14 2010-02-21 19:17 .psql_history
drwxr-xr-x 7 root root 4096 2010-02-21 17:13 share

So I have several questions related to the permission problem(s):

1) Is is necessary/wise/secure to have postgres' home directory the
working area of the server? If not, what is a recommended alternative
home?

2) After the installation, the owner/group of these files should be?

3) Is there a startup script for inclusion in /etc/init.d contained in
the source code package? If so which is it?

My ultimate goal is to read the pg_dumpall_20100219.sql into the server.
My attempts to do so have so far failed but that problem can't be
solved until the more basic ones are.