The following setup.py file:
"""
from distutils.core import setup, Extension
setup(name="foo", scripts= ["foo.py"])
"""
(plus any 'foo.py') fails when creating a .zip binary
on windows:

>setup.py bdist_dumb --relative
running bdist_dumb
...
error: build\bdist.win32\dumb\e:src\python-2.3-cvs:
Invalid argument

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It seems related to the function ensure_relative
(distutils/dir_utils.py, line 217), that keeps the drive
name in the relative path built.

>>> ensure_relative("C:\\Python24")
"C:Python24"

It is called by bdist_dumb to manage the relative path
properly, but fails so.

I can't guess what was the original intent (maybe for some
other OS, maybe just a simple error?), but the following
change seems to fix the issue:

$ diff --from-file=dir_util.old.py dir_util.py
226c226
<             path = drive + path[1:]
---
>             path = path[1:]

(just skip the drive name and the initial os.sep if any).

The ensure_relative() function is only used by bdist_dumb,
so I believe this change is safe, unless the "bogus" line
had some hidden intent I couldn't figure (other OS???).

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BTW, the patch shown in my previous comment applies to
distutils/dir_util.py from Python 2.4.

226c226
<             path = drive + path[1:]
---
>             path = path[1:]

I encounter the same problem of Mark Hammond. I check the code in
repository, the ensure_relative function in python25 is:

def ensure_relative (path):
    """Take the full path 'path', and make it a relative path so
    it can be the second argument to os.path.join().
    """
    drive, path = os.path.splitdrive(path)
    if sys.platform == 'mac':
        return os.sep + path
    else:
        if path[0:1] == os.sep:
            path = drive + path[1:]
        return path

I also checked python24, and didn't find the code which described by 
Patrice LACOUTURE in msg60533 (view).