Hi Dannon, I am also using postgres 9.1.9 (from Ubuntu precise repository)
 
$/usr/lib/postgresql/9.1/bin/postgres --version
-> postgres (PostgreSQL) 9.1.9
hg summary
-> parent: 10411:c42567f43aa7 tip
./scripts/cleanup_datasets/pgcleanup.py -d -o1 -s 'delete_datasets'
__load_config INFO 2013-09-26 10:02:10,368 Reading config from /opt/galaxy_testing/universe_wsgi.ini
__connect_db INFO 2013-09-26 10:02:10,371 Connecting to database with URL: #############@####
Traceback (most recent call last):
  File "./scripts/cleanup_datasets/pgcleanup.py", line 774, in <module>
    cleanup = Cleanup()
  File "./scripts/cleanup_datasets/pgcleanup.py", line 55, in __init__
    self.__connect_db()
  File "./scripts/cleanup_datasets/pgcleanup.py", line 115, in __connect_db
    self.conn = psycopg2.connect(**args)
TypeError: 'username' is an invalid keyword argument for this function
and if I add 
args['user'] = args['username']
del args['username'] @ line 112 in pgcleanup.py
the script seems to work.
./scripts/cleanup_datasets/pgcleanup.py -d -o1 -s 'delete_datasets'
delete_datasets INFO 2013-09-26 10:04:10,430 Marking deleted all Datasets whose associations are all marked as deleted/purged that are older than the specified number of days.
_create_event DEBUG 2013-09-26 10:04:10,457 SQL is: 
            INSERT INTO cleanup_event
                        (create_time, message)
                 VALUES (NOW(), 'delete_datasets')
              RETURNING id;
        
_create_event INFO 2013-09-26 10:04:10,457 Executing SQL
_create_event INFO 2013-09-26 10:04:10,458 Database status: INSERT 0 1
_update DEBUG 2013-09-26 10:04:10,458 SQL is: 
                WITH deleted_dataset_ids
                  AS (     UPDATE dataset
                              SET deleted = true,
                                  update_time = NOW()
                            WHERE NOT deleted
                                  AND NOT EXISTS (SELECT true
                                                    FROM library_dataset_dataset_association
                                                   WHERE (NOT deleted
                                                          OR update_time >= (NOW() - interval '1 days'))
                                                         AND dataset.id = dataset_id)
                                  AND NOT EXISTS (SELECT true
                                                    FROM history_dataset_association
                                                   WHERE (NOT purged
                                                          OR update_time >= (NOW() - interval '1 days'))
                                                         AND dataset.id = dataset_id)
                        RETURNING id),
                     dataset_events
                  AS (INSERT INTO cleanup_event_dataset_association
                                  (create_time, cleanup_event_id, dataset_id)
                           SELECT NOW(), 2, id
                             FROM deleted_dataset_ids)
              SELECT id
                FROM deleted_dataset_ids
            ORDER BY id;
        
_update INFO 2013-09-26 10:04:10,458 Executing SQL
_update INFO 2013-09-26 10:04:10,461 Database status: SELECT 0
_flush INFO 2013-09-26 10:04:10,475 All changes committed
_open_logfile DEBUG 2013-09-26 10:04:10,475 Opening log file: /opt/galaxy_testing/scripts/cleanup_datasets/delete_datasets.log
_close_logfile DEBUG 2013-09-26 10:04:10,476 Closing log file: /opt/galaxy_testing/scripts/cleanup_datasets/delete_datasets.log
_run INFO 2013-09-26 10:04:10,476 Finished delete_datasets