The following bug has been logged online:

Bug reference:      2749
Logged by:          Hagen
Email address:      [EMAIL PROTECTED]
PostgreSQL version: 8.2beta2
Operating system:   OSX
Description:        Function's final statement must be a SELECT
Details: 

create function test(text) returns table as $sql$
  insert into table(value) values($1) returning *;
$sql$ language sql;


really should work now, instead I get:
PGError: ERROR:  return type mismatch in function declared to return table
DETAIL:  Function's final statement must be a SELECT.

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