Using md5 authentication

Hello,

I want to connect to my database using a md5 hash instead of the plain 
password, so i changed the authentication method in the pg_hba.conf to 
md5 instead of password.
example: i want to use '5f4dcc3b5aa765d61d8327deb882cf99' instead of 
'password' in the login mask.

But until now i didn't get it working, i still can connect to the 
database with the plain password but not with the corresponding md5 
Hash. When i'am using the md5 hash i just get a FATAL error for password 
authentication. I used pg_ctl to reload the pg_hba.conf and also 
restarted the server.

Also the md5 hash which is saved for the users in the database differs 
from my created ones for that specific password. I read that the 
passwords are salted before encrypted with a part of the usernames? But 
even if i use these md5 hashes as password input, i can not connect and 
get a FATAL error.

BTW is it possible to use SHA-1 encrypted passwords with postgresql?

I'am currently using postgresql 8.4.

pg_hba.conf
local   all         all                                md5
host    all         all         127.0.0.1/32           md5

Best recards,
pp