I've no time to dig deeper now as I suspect testing will require removal
of the vc9 assembly from the GAC and testing with a local one, but some
comments:

test.c's error is "can't find the DLL" - this will be as we attempt to
load Python's DLL - but this isn't the same as the original error, which
is "DLL init routine failed".  To repro the initial error, I suspect you
will want to put the full assembly next to test.exe - that will allow
python.dll to load - then test.c should call PyExec_EvalString("import
socket\n") - it is at *that* point the error we care about is likely to
be thrown.

That specific error code means the DLL init routine in the CRT started
executing, but explicitly threw an error.  Its possible to use the
debugger to see exactly when this is thrown, and it relates to the
assembly configuration (the details escape me).  I suspect it will be
necessary to locate this CRT init code to determine exactly why it is
throwing the error, and possibly determine how to satisfy it (the DLL
*is* loaded, so it should be capable of working)