postgresql performance degradation over time....

Hi folks,

this is my first post to this emailing list. We are using postgres-7.4
in a Server based application which requires frequent updates and
inserts of the database. We have observed a substantial fall in the
performance of database server over the time. It works fine for some
initial days and then its performace falls... and goes on falling as
the days passes by ( there is not much increase in the size of the
database)

I have heard that updates and deletes in any DB bring in some sort of
fregmentation in the database, and we are using vaccum feature ot the
postgres to defragment. We have also tweaked the performance
parameters in postgresql.conf ... but its not helping.

So i was wondering , how can be maintain the performace of postgres
over the time ?
Will taking the dump of database and then deleting all tables and then
restoring it will help ??

I am just clueless, any help/pointers to some useful link would be appriciated.

thanks in advance,

-sunil