Can't use passwords for users

I'm new to postgres, so bare with me.

I installed version 8.2 from rpms on Suse 10.

I then changed to the postgres user and ran initdb.

After that I create a database called movies using the command "createdb
movies"

Then I used the pg_ctl command to start the postmaster with the
following command:

pg_ctl start -l /tmp/pg.log -o -i

Everything at this point was working fine. I was able to use the
postgres user to work in the database.

I wanted to create another user so I quit the database and went back to
my normal prompt.

I then used the command "createuser test -pwprompt"

I got the following questions (which I answered "n" for each):

Shall the new role be a superuser? (y/n) n

Shall the new role be allowed to create databases? (y/n) n

Shall the new role be allowed to create more new roles? (y/n) n

PLEASE READ THE FOLLOWING ERROR AND THE STUFF BELOW. I KNOW THIS ERROR
HAS BEEN SEEN BEFORE, BUT I HAVEN'T FOUND ANY EXAMPLES OF MY SPECIFIC
PROBLEM!!

I then got the following output (I'm assuming this is when I'd be
prompted for a password):

createuser: could not connect to database postgres: could not connect to
server: No such file or directory

Is the server running locally and accepting connections on
Unix domain socket "/tmp/.s.PGSQL.0"?

I've looked at everything I could find about this error. I know the
server is running because I can connect to it with the postgres account.
It actually did create the user 'test' and I can connect to the database
as long as I don't attempt to use a password. The 'test' account must
also be a valid account on my Linux machine which has something to do
with the IDENT authentication type. I don't want to use IDENT, I want
to use passwords. I checked and there is an active listening Unix
socket on port 5432 like there should be. I don't have PGPORT set as an
environment variable, and even setting one to 5432 did not get rid of
this problem. I also tried manually creating the account test inside of
postgresql using the command "create user test nocreatedb nocreateuser
password 'testPassword'". This didn't give me any errors, but when I
tried to log into the database using the command: "psql -U test -p
testPassword -d movies" I got the same error as above.

REPEAT: I AM ONLY SEEING THIS ERROR WHEN I TRY TO USE PASSWORDS ON USER
ACCOUNTS. I need to use this type of security. Can anyone tell me
what's going on? Everything else works fine.

On a side note, I also want to use TCP/IP connections. I changed the
postgresql.conf file to set LISTEN_ADDRESSES to '*'. Is there anything
else I need to do? Do I need to set the old VIRTUAL_HOST and
TCPIP_SOCKET variables? Or does LISTEN_ADDRESSES take care of all that?
What do I have to do to the pg_hba.conf file to allow all incoming
connections?

Thanks for any help you can offer. I greatly appreciate it.

-Jonathan