Query with varchar not using functional index

Hello,

I've got a very strange problem that I'm seeing in one of our PostgreSQL
databases (7.4.19). Specifically, I have a query that only uses the
functional index that it's supposed to use if I cast to text.

Here is a slimmed down version of the table definition:
Column | Type | Modifiers
-------------------------+------------------------+-----------
case_id | character varying(50) | not null
case_public_id | character varying(50) |
Indexes:
"case_data_case_id" unique, btree (case_id)
"case_data_squish_public_id" btree (squish((case_public_id)::text))

Here is the query that DOES NOT work:
dev=# explain select * from case_data where squish(case_public_id) like
'84D04-0806-SC-06491';
QUERY PLAN
---------------------------------------------------------------------------------------------------------------
Seq Scan on case_data (cost=0.00..334288.23 rows=40730 width=228)
Filter: (upper(translate((case_public_id)::text, '- \011'::text,
''::text)) ~~ '84D04-0806-SC-06491'::text)

And here is the query that DOES work:
dev=# explain select * from case_data where squish(case_public_id::text)
like '84D04-0806-SC-06491';
QUERY PLAN
------------------------------------------------------------------------------------------------------------------
Index Scan using case_data_squish_public_id on case_data
(cost=0.00..148228.78 rows=40730 width=228)
Index Cond: (upper(translate((case_public_id)::text, '- \011'::text,
''::text)) = '84D04-0806-SC-06491'::text)
Filter: (upper(translate((case_public_id)::text, '- \011'::text,
''::text)) ~~ '84D04-0806-SC-06491'::text)

And here is the definition of the squish() function:
dev=# \df+ squish
List of functions
Result data type | Schema | Name | Argument data types | Owner |
Language | Source code | Description
------------------+--------+--------+---------------------+----------+----------+---------------------------------------+-------------
text | public | squish | text | postgres |
sql | SELECT upper(translate($1,'- ','')); |

I think I may see what's going on. The function definition has an argument
data type of 'text', so I guess that's why PostgreSQL wants me to cast to
'text'. But what is confusing me is the exact same setup works as expected
on our 7.4.7 database server (the problem server is 7.4.19). Has something
changed that would cause this behavior since 7.4.7? Also, why is PostgreSQL
requiring an explicit cast to 'text'? I thought varchar and text were
functionally identical data types.

Thank you so much for your help. PostgreSQL is a phenomenal product.

Ryan VanMiddlesworth