ALTER USER does not work

postgresql 7.3.1 - cannot change user either from command line psql or from
Webmin.
I just migrated a database from 7.2 to 7.3 .  On the 7.2 box, the user had
a password and the website functioned fine. On the 7.3 box, the wesite does
not log on properly and I suspect it is because the database is not being
correctly accessed. I am unable to change the username on the 7.3 box to
have a password. I seem to be able to delete the user but not set it with a
password or with NOCREATEDB or NOCREATEUSER.
Is there a setting in postgresql.conf or pg_hba.conf that need to be
changed? Do the access priviledges need to be change from trust to
password? (The machine is only on the local LAN, so security is not an
issue for now.
I'm a little lost.
Thanks for any help.
PJ