memory usage of group by select

Hi all,

I'm running a group by query on a table with over a billion rows and my
memory usage is seemingly growing without bounds. Eventually the mem usage
exceeds my physical memory and everything starts swapping. Here is what I
gather to be the relevant info:

My machine has 768 megs of ram.

shared_buffers = 128MB
work_mem = 8MB # this was originally higher, but I brought it down to try to
fix the problem - it hasn't
maintenance_work_mem = 256MB
fsync = off
checkpoint_segments = 30
effective_cache_size = 256MB #this was originally 512MB but I just recently
brought it down - as I expected that didn't affect anything

data=# explain select pid, min(oid) into nd_min from nd group by pid;
QUERY PLAN
------------------------------------------------------------------------
HashAggregate (cost=28173891.00..28174955.26 rows=85141 width=8)
-> Seq Scan on nd (cost=0.00..21270355.00 rows=1380707200 width=8)
(2 rows)

data=# \d+ nd
Table "fullplanet091207osm.nd"
Column | Type | Modifiers | Storage | Description
--------+---------+-----------+---------+-------------
oid | integer | not null | plain |
pid | integer | not null | plain |
ref | integer | | plain |
Indexes:
"nd_pkey" PRIMARY KEY, btree (pid, oid)
Has OIDs: no

VERSION = 'PostgreSQL 8.4.1 on x86_64-pc-linux-gnu, compiled by GCC
gcc-4.4.real (Ubuntu 4.4.1-3ubuntu3) 4.4.1, 64-bit'