Ok, some more tests. I get the exact same problem if I change the URI to use postgresql. So it isn't sqlite related as I first thought.
'sqlobject.dburi':"postgres://[EMAIL PROTECTED]/tgtest" fails too, in the exact same way. Just hope this isn't a thread related problem. I will continue to work on my prototype (because it has to get somewhere), but I have a feeling that this is going to come back to bite me eventually...

