Solved the problem.
Has to be added to the datasource. Maybe someone can update the XA-postgresql example to include this.
Current PostGres supports a subset of the XA specification. As you discovered, suspend/resume is not supported which requires that a connection cannot be dissassociated from a transaction until completion. I will file a JIRA task to create a postgres-xa-ds.xml file with the necessary qualifications for use. I can get this into JBoss 4.2.