I'm also having this problem.  I installed with the Ubuntu packages on Kubuntu 
7.04, following the installation instructions religiously 
http://tinyerp.org/wiki/index.php/InstallationManual/InstallFromPackages
and 
http://tinyerp.org/wiki/index.php/InstallationManual/SetupAPostgresqlUserAndDatabase

The server is running:

$ netstat -l
Active Internet connections (only servers)
Proto Recv-Q Send-Q Local Address          
 Foreign Address         State
...
tcp        0      0 localhost:8069  
        *:*            
         LISTEN
...
tcp        0      0 
localhost:postgresql    *:*          
           LISTEN




I have verified that the database terp exists with PGAdmin3.  And, running the 
tinyerp-server by hand shows that it does connect to the database.  (BTW, where 
does the tinyerp-server put its log when run as a service?  I couldn't find one 
anywhere)

I can telnet to telnet to localhost:8069 and get a response.

But, when I start tinyerp-client, the TinyERP - Login Dialog says Database: 
Could not connect to server!

Please help!  What am I missing?

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