Political reasons have ruled out the dump and reload options, but restoring the entire database took several hours. I'm also restricted on version because newer versions of postgres are not supported with that specific product, including maintenance updates.
Ultimately it is their responsibility to make the decision whether or not to upgrade. It is your responsibility to provide the data necessary to help them make an informed choice.
Often the reason for these technoligically stupid policies is third-party software, where vendor X says, "we only support Postgres 8.3.2, using anything else voids our service agreement." If that's the problem here, then ask vendor X if they're willing to take responsibility for the potential data corruption that their policy will cause. Vendors that work with Postgres need to understand that "minor releases" won't break their applications, and that they should encourage their customers to keep their Postgres software up to date.
If, on the other hand, this is your company's internal policies, then pass Steve's message along in with a strongly worded admonition that they pay attention.