another "EXPLAIN -- NO INDEX?" question

okay, i've seen tom's discourse on the explain feature at
http://www.ca.postgresql.org/users-lounge/docs/7.0/user/c4884.htm
but i can't grok why this index is ignored:

create table servers (
    id serial,
    name varchar(80),
primary key ( id )
);

insert into servers(name)values('serensoft.com');
insert into servers(name)values('dontUthink.com');
insert into servers(name)values('midwestRepo.com');

create table hits (
    at      timestamp default now(),
    client  inet,
    server  integer references servers ( id ),
    url     varchar(255),
    referer varchar(255),
primary key ( server, at )
);

-- insert thousands of records into hits() table
-- with references for servers.id set properly


hits=# explain
hits-# select * from hits where server = 3;

    NOTICE:  QUERY PLAN:
    Seq Scan on hits  (cost=0.00..7870.51 rows=10301 width=90)
    EXPLAIN

hits=# explain
hits-# select * from hits where server = 1;

    NOTICE:  QUERY PLAN:
    Seq Scan on hits  (cost=0.00..7870.51 rows=10301 width=90)
    EXPLAIN

hits=# explain
hits-# select * from hits where (server = 1 or server = 3);

    NOTICE:  QUERY PLAN:
    Seq Scan on hits  (cost=0.00..8537.01 rows=20205 width=90)
    EXPLAIN

hits=# select count(*) from hits;
     count
    --------
     266611
     (1 row)

hits=# select count(*) from hits where (server=1 or server=3);
     count
    -------
      3678
    (1 row)

hits=# SHOW enable_indexscan ;

    NOTICE:  enable_indexscan is on
    SHOW VARIABLE

--------------------

with 1.5% (3.7k of 267k) filtered, shouldn't it use the index?

$ psql -V
psql (PostgreSQL) 7.1
contains readline, history, multibyte support
Portions Copyright (c) 1996-2001, PostgreSQL Global Development Group
Portions Copyright (c) 1996 Regents of the University of California
Read the file COPYRIGHT or use the command \copyright to see the
usage and distribution terms.

--
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will@serensoft.com
http://sourceforge.net/projects/newbiedoc -- we need your brain!
http://www.dontUthink.com/ -- your brain needs us!