I found the errror in my previous patch. It lacked a self.decode=.. line 
in the StreamReader.decode elif branch. 

I attach a replacement patch diff-u.py26_utf8sig (apply to the 2.6 version 
of utf_8_sig.py. (If allowed, I will next remove the incorrect patch.)

This one passes test_codecs.py as well as my previously attached test 
module.

The resulting utf_8_sig.py may benefit from further refctoring, but I 
didn't want to do more than necessary to fix the immediate bug.

Regards,
..jim