Troubleshooting create db errors

Having setup a new Ubuntu 8.04 with Openerp 5.0.10, it was not possible to create databases.

Watching the usual suspect logs:
tail -f /var/log/messages /var/log/syslog /var/log/daemon.log /var/log/openerp/server.log /var/log/postgresql/postgresql-8.3-main.log &

010-06-03 18:07:26 CEST FATAL:  Ident authentication failed for user "openerp"
2010-06-03 18:08:25 CEST ERROR:  encoding UTF8 does not match server's locale en_US
2010-06-03 18:08:25 CEST DETAIL:  The server's LC_CTYPE setting requires encoding LATIN1.
2010-06-03 18:08:25 CEST STATEMENT:  CREATE DATABASE "tipop1" ENCODING 'unicode' TEMPLATE "template0"

Then tried to connecton on the command line to test DB creating:

psql -U openerp template1

This would not work:
CREATE DATABASE "tipop1" ENCODING 'unicode' TEMPLATE "template0"

but this would:

Spend hours changing this issues trying to find explanations and solutions, seems ot be a hazy mix of authetnication and locale issues. The more I looked at locales, the worse it got.

In the end I did the importing this of hacking bin/service/ and replacing unicode with LATIN1 in the create database statement.

Will see what consequence it has, but am noting the hack here for now..