This bug is quite bad, and was reported as far back as 2005 on distutils-sig.  If one runs “python setup.py build_ext --inplace build”, then for example runs tests, and then “python setup.py install” runs build again, which runs build_py (.py files are already in the build directory, do nothing) then build_ext (.so files are not in the build directory: build them), so extensions modules are installed.  But if one has “[build_ext] inplace=1” in the setup.cfg, then the .so files will not be recompiled and not installed.

It would be interesting to test if bdist_wheel is affected, as bdist commands use the install command under the hood.