Yes, starting with the 8.1dev-403 driver. However, transaction interleaving is not supported.
Transaction interleaving means that one database connection can be used for multiple transactions at the same time, switching between the transactions.
Transaction interleaving is mostly useless, but it's a required part of the JTA specification. Some application servers use it to allow a bit more concurrency without allocating a bigger jdbc connection pool.
Few JDBC drivers support transaction interleaving properly. Some fake it by issuing early prepare commands, risking transaction integrity, some give strange error messages, some fail in other, subtle ways. The PostgreSQL JDBC driver does it's best to detect interleaving and throws a proper error message when it can't do what's requested.
Because of the lack of driver support, all of the popular application servers provide options to work around it, or don't use it at all. Therefore, lack of transaction interleaving shouldn't affect your application or data integrity.
See the JTA specification, section 3.4.4, or search the pgsql-jdbc mailing list archives for more information.
This is related to batched queries and synchronous TCP.
The thing to look at is setting the network buffer sizes to use to large values to avoid the deadlock. The default values are machine dependent which also explains it working or not on different machines (credit to Kris Jurka)
By default, 8.x versions of the driver use protocol version 3 when communicating with servers 7.4 or higher. This protocol allows for more efficient query execution and enables true server-side prepared statements, but also places some additional restrictions on queries. Problems with upgrading the driver generally fall into one of two categories:
Parameter Typing. Previous versions of the driver sent all PreparedStatement parameters to the server as untyped strings, and allowed the server to infer their types as appropriate. When running protocol version 3 however, the driver specifies the type of each parameter as it is being sent. The upshot of this is that code which was previously able to call (for example): PreparedStatement.setObject(1, "5") to set an integer parameter now breaks, because setting a String value for an integer parameter is not allowed.
Parameter Position. Previous versions of the driver emulated PreparedStatements by performing string replacements each time the query was executed. Newer drivers using protocol 3 however actually use server-side prepared statements with placeholders for the positional parameters. The upshot of this is that '?' positional parameters are now only allowed where the PostgreSQL back-end allows parameters.
In situations where it is difficult to modify the Java code and/or queries to work with the newer protocol version, it is possible to force the driver to use an older protocol version to restore the old behavior. Look in the documentation for the protocolVersion connection parameter.