Upon execution of python.exe a command line box appears for a fraction of a second, closes and is followed by nothing. On executing IDLE from the start menu, nothing happens. I have installed python to C:\Python27 using the python windows installer.
I am running win7 64 bit on a toshiba satellite 17X

Can you try to open a Windows terminal (start->run->cmd or win+r on the keyboard), cd to Python27, execute python.exe and see if it gives any error message there?

The error message is:
ImportError: No module named site.

The 'site' module should be in Python27\Lib\site.py.
You could try to run "python.exe -v" to see if it says something useful in the output, or maybe try to reinstall Python and see if it works.

The site module is in the right place
This is what I got running the -v flag: (I don't know what you're looking for)

Microsoft Windows [Version 6.1.7601]
Copyright (c) 2009 Microsoft Corporation.  All rights reserved.

C:\Users\PWTD>c:\Python27\python.exe -v
# installing zipimport hook
import zipimport # builtin
# installed zipimport hook
ImportError: No module named site
# clear __builtin__._
# clear sys.path
# clear sys.argv
# clear sys.ps1
# clear sys.ps2
# clear sys.exitfunc
# clear sys.exc_type
# clear sys.exc_value
# clear sys.exc_traceback
# clear sys.last_type
# clear sys.last_value
# clear sys.last_traceback
# clear sys.path_hooks
# clear sys.path_importer_cache
# clear sys.meta_path
# clear sys.flags
# clear sys.float_info
# restore sys.stdin
# restore sys.stdout
# restore sys.stderr
# cleanup __main__
# cleanup[1] zipimport
# cleanup[1] signal
# cleanup[1] exceptions
# cleanup[1] _warnings
# cleanup sys
# cleanup __builtin__
# cleanup ints: 6 unfreed ints
# cleanup floats

C:\Users\PWTD>c:\Python27\python.exe
ImportError: No module named site

Reinstalling makes no difference- have tried multiple times

What happens if you try "python -S" (capital S)? In principle this should bypass the need to load site.py. Even if that works we still have a problem to solve, but at least it might narrow things down.

Gave it a go: the prompt appears, but none of the functions work thereafter

C:\Users\PWTD>c:\Python27\python -S
Python 2.7.1 (r271:86832, Nov 27 2010, 18:30:46) [MSC v.1500 32 bit (Intel)] on
win32
>>> print "hello"

LookupError: no codec search functions registered: can't find encoding
>>>

From a Windows command prompt:
- what is the output of "chcp"?
- maybe an environment variable issue? Try "set PY" to display all variables starting with PY.

C:\Users\PWTD>set PY
PYTHONHOME=c:\program files (x86)\steam\steamapps\common\alien swarm\swarm\..\sdktools\python\2.5

C:\Users\PWTD>chcp
Active code page: 850

C:\Users\PWTD>

hmm, I don't like this PYTHONHOME. Can you reset its value and run python again in the same terminal?

C:\Users\PWTD>set PYTHONHOME=
C:\Users\PWTD>c:\Python27\python

Ok, python now works in command prompt, but IDLE still wont run.
Also, PYTHONHOME needs to be reset on every start up of command prompt.

Yes, this is probably a system-wide setting. PYTHONHOME should not be set, especially if it points to another python installation.
You should consider removing it.

Is "alien swarm" a game? Why did it modify the system this way? Does the game still work when you remove the environment variable?

Awesome. It's fixed- do you still want to know whether or not the game works.
In case it helps, I installed the game before python

It's definitely a bad thing to set PYTHONHOME at the system level, when there are several pythons installed. Please report this to the game's developers.