setup.py --dry-run install does what you'd expect. 

setup.py install --dry-run silently ignores the dry-run
flag.

Here's the usage of setup.py

    usage: setup.py [global_opts] cmd1 [cmd1_opts] [cmd2 [cmd2_opts] ...]
       or: setup.py --help [cmd1 cmd2 ...]
       or: setup.py --help-commands
       or: setup.py cmd --help

and '--dry-run' is a global option.
So it looks like valid behavior for me.

yes, that's the expected behavior

*But* we could add a warning, that says that an option was unused.

“Global option” could be understood as “option that can be given to any command”, i.e. “egg spam -d” == “egg -d spam”. Is it feasible to support such and equivalence, too difficult or not desirable?

Regards

Being able to write a global option after a command name seems a nice feature to me, and the implementation should be straightforward: The base Command class already adds some options like help to each subclass, it’s just a matter of adding verbose, quiet and dry-run and adapting distribution.

no-user-cfg would have to be special-cased: Giving this option to one command  would just pass it to the Distribution instance. Supporting per-command no-user-cfg would be overly complicated and not really useful.