BUG #1231: Probelm with transactions in stored code.

The following bug has been logged online:

Bug reference:      1231
Logged by:          Piotr Figiel

Email address:      p.figiel@aplok.pl

PostgreSQL version: 7.4.3

Operating system:   Linux Suse

Description:        Probelm with transactions in stored code.

Details:

Hello
I have a problem with transactions in  stored code in database.
This is testcase:

create table test_trans
( id numeric(4,0),
  next_number numeric(4,0)
);

insert into test_trans values (1,1);

CREATE OR REPLACE FUNCTION test_tr()  RETURNS numeric AS'
DECLARE
a numeric;
b numeric;
BEGIN
select next_number into b from test_trans where id=1;
update test_trans set next_number=next_number+1 where id=1;
select next_number into a from test_trans where id=1;

RETURN a ;
END;
'
LANGUAGE 'plpgsql' VOLATILE;

What I do then.
I've run two sessions.
In first I've run test_trans(), then in second I've run test_trans() too.
Second sessions waiting for first commit or rollback. Very good. Then I've
commited first session. What I see then:
First session returned value 2 - very good, but second session returned
value 1 - poor, oooo poor. Why , why, why? Second session should  returned
value 3.
What happends. In  version 8.0 Beta is the same situation. Additionl info:
I've must user read commited transacion isolation.
Please answer for my problem. My application based on this database but this
problem show everyone that PostgreSQL is not a transactional database.
Reagards
Piotr Figiel