psqlODBC driver does not work

I've problem getting the psqlODBC driver and ODBC in
general to work on RedHat 9. I've built and installed
PostgreSQL ver. 7.4.2, unixODBC driver manager
ver. 2.2.8, and psqlODBC driver ver. 07.03.0200 without
errors. In the documentation I've seen that the
driver's name is libpsqlodbc.so, but I cannot find
libpsqlodbc.so anywhere on the system. The psqlODBC
distribution builds 'psqlodbc.so' and 'psqlodbc.la'. I
tried using 'psqlodbc.so' in 'odbcinst.ini' as a value
of the 'Driver' field, but I could not connect to my
database using 'isql', namely, once I type the command

isql -v examples_ODBC userfoo passwd

and press ENTER 'isql' hangs and I have to kill it with
^C.

Could somebody point me in the right direction. I
don't even sure of the right library name. EVEN SHORT
SUGGESTIONS APPRECIATED :-)

If relevant, this is the log of this run:
---psqlodbc_userfoo626.log-----------------------------
conn = 134628032, PGAPI_Connect(DSN='examples_ODBC',
UID='userfoo', PWD='xxxxx') Global Options:
Version='07.03.0200', fetch=100, socket=4096,
unknown_sizes=0, max_varchar_size=254,
max_longvarchar_size=8190
disable_optimizer=1, ksqo=1,
unique_index=1, use_declarefetch=0
text_as_longvarchar=1,
unknowns_as_longvarchar=0,
bools_as_char=1 NAMEDATALEN=64
extra_systable_prefixes='dd_;',
conn_settings='' conn_encoding='OTHER'
conn=134628032, query=' '
---(END OF) psqlodbc_userfoo626.log--------------------

I've built ODBC driver from unixODBC distribution:
'libodbcpsql.so' and connected using that one with
isql. I could run queries, but 'isql' hangs and has to
be killed with ^C as described above once I enter
'quit' on its prompt. Moreover, I could connect
if I set authentication in 'pg_hba.conf' for 'local'
and 'host' to 'trust' or 'passwd', but connection fails
if I set it to 'crypt' or 'md5'.

If relevant, here are my '.ini' files:
------odbcinst.ini---------
[PostgreSQL_unixODBC]
Description = unixODBC for PostgreSQL
Driver = /usr/local/lib/libodbcpsql.so
Setup = /usr/local/lib/libodbcpsqlS.so
FileUsage = 1
CommLog = 1
Debug = 1
---end of odbcinst.ini-----

---.odbc.ini---------------
[ODBC Data Sources]
examples_ODBC = Database Examples

[examples_ODBC]
Database = examples
Description = Various tutorial examples
ReadOnly = No
Servername = localhost
Port = 5432
Protocol = 7.4
Driver = PostgreSQL_unixODBC
Username =
Password =
Trace = Yes
Tracefile = /tmp/unixODBC.log
CommLog = 1
Debug = 1
---end of .odbc.ini-----

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