vacuum taking longer over time

To whom it may concern,

I currently have postgres 7.4.2 running on a dedicated server which has
1GB RAM and a Pentium 4 2600 Mhz processor.

After approximately 1 month I have to dump & restore the database
because vacuum time spirals out of control. To give you an idea of what
I experience, when the DB is restored it takes 1 hour to vacuum, however
by the time the restore is 30 days old it can take up to 6 hours.

The DB is approximately 6 GB in size and is vacuumed analyzed nightly
because of a relatively high number of transactions per day.

The file system is reiserfs and contains no errors.

Another thing that I noticed from the vacuum logs is that the total
pages needed shortly after restore is approximately 17000 and ends up
over 50000 by the time the restore is 30 days old.

Does this mean the DB is becoming fragmented?

Will upgrading to postgres 8.0 resolve this problem?

Any ideas would be greatly appreciated.

Thanks in advance.

Enzo D'Addario