Can Postgres use an INDEX over an OR?

Hi. I notice that when I do a WHERE x, Postgres uses an index, and when I do
WHERE y, it does so as well, but when I do WHERE x OR y, it doesn't. Why is
this so? And how can I shut this off?
select * from dict
where
word in (select substr('moon', 0, generate_series(3,length('moon')))) --
this is my X above
OR word like 'moon%' -- this is my Y above

Seq Scan on dict (cost=0.02..2775.66 rows=30422 width=24) (actual
time=16.635..28.580 rows=8 loops=1)
Filter: ((hashed subplan) OR ((word)::text ~~ 'moon%'::text))
SubPlan
-> Result (cost=0.00..0.01 rows=1 width=0) (actual time=0.014..0.019 rows=2
loops=1)
Total runtime: 28.658 ms
(Using just X or Y alone uses the index, and completes in 0.150 ms)

Is this a bug?

PS Running "PostgreSQL 8.2.1 on i686-pc-mingw32, compiled by GCC gcc.exe
(GCC) 3.4.2 (mingw-special)"