The hardware it is running on is fairly good, dual Xeon CPUs, 4 GB of RAM, Raid 5.
For a database you'd want to consider replacing the RAID1 with a RAID1 (or RAID10). RAID5 is slow for small random updates, which are common in databases. Since you probably have enough harddisks anyway, this won't cost you. Linux or freebsd would also be better choices for postgres rather than windows.
Also, as said, your issue looks very much like a problem in the way your application communicates with postgres : if it takes postgres 5 ms to process the query and your application gets the result 8 seconds later, there is a problem. Note that SQL Server probably takes just a few ms for such a simple query, too, so your not really benchmarking SQL server either.
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