default value not working?

                            version                             
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 PostgreSQL 7.1 on sparc-sun-solaris2.6, compiled by GCC 2.95.2

Ok, I ported my Oracle database and my developers started complaining that
their defaults are not working.  Could someone tell me if I am doing
something wrong and what the workaround is. 
If I were not so new to postgres, I would think this is a bug for sure.

I tried the following cases. 

--Example 1 default set null permitted.

gcf_dev=> create table test1(test varchar(1) default 'N');
CREATE

gcf_dev=> insert into  test1 (test) values (null);
INSERT 38096 1

gcf_dev=> select * from test1;
 test 
------
 
(1 row)
--Example 2 default set not null

gcf_dev=> create table test2(test varchar(1) not null default 'N');
CREATE

gcf_dev=> insert into  test2 (test) values (null);
ERROR:  ExecAppend: Fail to add null value in not null attribute test

--Example 3 tried switching order of not null and default in definition
--Also tried inserting empty length string to see if that will get default
to fire 
--No luck.

gcf_dev=> create table test3(test varchar(1) default 'N' not null);
CREATE

gcf_dev=> insert into test3 (test) values (null);
ERROR:  ExecAppend: Fail to add null value in not null attribute test

gcf_dev=> insert into test3 (test) values ('');
INSERT 38119 1

gcf_dev=> select * from test3;
 test 
------
 
(1 row)