Since we had a launch happening I had to come up with another solution. I ended up importing the posterous backup into a wordpress.com site, exported from there, and then uploaded to our self hosted installation.
I just re-installed the plug-in and I'm no longer getting the same error. However I did notice that if the WordPress Importer plug-in is also activated, attempting to access 'http://barrelnews.barrelny.com/wp-admin/import.php' throws a 500 internal server error.
Probably not a huge issue, but thought I'd give you a heads up incase users have both installed for some reason.
Hope this helps!