To mimic the MySQL-REPLACE statement (aka UPSERT) I need to try to UPDATE a record and if that fails - INSERT it. But how can I detect that the UPDATE has failed in my SQL procedure?
begin transaction;
create table pref_users (
       id varchar(32) primary key,
       first_name varchar(32),
       last_name varchar(32),
       female boolean,
       avatar varchar(128),
       city varchar(32),
       lat real check (-90 <= lat and lat <= 90),
       lng real check (-90 <= lng and lng <= 90),
       last_login timestamp default current_timestamp,
       last_ip inet,
       medals smallint check (medals > 0)
);
create table pref_rate (
       obj varchar(32) references pref_users(id),
       subj varchar(32) references pref_users(id),
       good boolean,
       fair boolean,
       nice boolean,
       about varchar(256),
       last_rated timestamp default current_timestamp
);
create table pref_money (
       id varchar(32) references pref_users,
       yw char(7) default to_char(current_timestamp, 'YYYY-WW'),
       money real
);
create index pref_money_yw_index on pref_money(yw);
create or replace function update_pref_users(id varchar,
       first_name varchar, last_name varchar, female boolean,
       avatar varchar, city varchar, last_ip inet) returns void as $$
       update pref_users set
            first_name = $2,
            last_name = $3,
            female = $4,
            avatar = $5,
            city = $6,
            last_ip = $7
        where id = $1;
        -- XXX how to detect failure here? XXX
       insert into pref_users(id, first_name, last_name,
            female, avatar, city, last_ip)
            values ($1, $2, $3, $4, $5, $6, $7);
$$ language sql;
commit;
And do I need a 2nd pair of BEGIN/COMMIT inside of my update_pref_users SQL-function?
You can't use SQL as a language, you need pl/pgsql because of the lack of if-else constructions in SQL.
Within pl/pgsql you can use the special variable FOUND to see if a query has found something.
UPDATE ...;
IF NOT FOUND THEN -- UPDATE didn't touch anything
  INSERT ...;
END IF;
There is no need for extra SELECT statements.
IF EXISTS(<query to select record required for update>)
    UPDATE ...
ELSE
    INSERT ...
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