distutils package installation isn't compatible with IronPython.

To reproduce first install IronPython 2.6 (RC1 is currently latest
version) from the msi installer. This installs by default on Windows
into "C:\Program Files\IronPython 2.6" and includes a "site-packages"
folder in the "Lib" subfolder.

With the simplest Python package created with "python setup.py sdist"
(CPython) from the first example in the distutils documentation I get
the following on install:

C:\compile\test\foo-1.0>"C:\Program Files\IronPython 2.6\ipy.exe"
setup.py install
running install
running build
running build_py
creating build
creating build\lib
copying foo.py -> build\lib
running install_lib
copying build\lib\foo.py -> C:\Program Files\IronPython
2.6\Lib\site-packages
error: C:\Program Files\IronPython 2.6\Lib\site-packages\foo.py: None

C:\compile\test\foo-1.0>dir "C:\Program Files\IronPython
2.6\Lib\site-packages"

 Volume in drive C has no label.
 Volume Serial Number is FC33-85DD

 Directory of C:\Program Files\IronPython 2.6\Lib\site-packages

06/10/2009  11:37    <DIR>          .
06/10/2009  11:37    <DIR>          ..
15/09/2009  08:53               121 README.txt
               1 File(s)            121 bytes
               2 Dir(s)  71,854,129,152 bytes free


See also the following bug report against IronPython on the codeplex
issue tracker. Here the distutils install fails in bytecode compilation. 

http://ironpython.codeplex.com/WorkItem/View.aspx?WorkItemId=24810

Bytecode compilation should not be attempted on IronPython as it does
not use Python bytecode. ( sys.dont_write_bytecode is True )

The fixes should be backported to Python 2.6 *if possible* as IronPython
2.6 uses the standard library from SVN and will pick up changes even
between releases.