Hi Jim,
Are you running on an application server?
If yes have you tried to create a datasource in the applicaiton server ? If you're using jboss then you could use the testDS1-ds.xml , the contents of which are mentioned in http://docs.jboss.org/jbpm/v5.0/userguide/ch08.html .
If that does not work i would suggest to test the rest of your configuration with the default h2 configuration regarding persistence and if it works then we could focus on the postgres requirements/properties, otherwise something is wrong with the rest of the configuration.... does this make sense ? :)