I've opened [https://bugs.launchpad.net/tahoe-lafs/+bug/821000 Launchpad bug #821000] to track the way this affects setuptools, distribute, Ubuntu, and Tahoe-LAFS (via our local fork of setuptools named "zetuptoolz").

Brian Warner has opened a ticket against Tahoe whose root problem is mostly this
issue:

http://allmydata.org/trac/tahoe/ticket/709 # hard to run against alternate
dependencies, i.e. trunk version of Foolscap

See also http://mail.python.org/pipermail/distutils-sig/2009-January/010880.html
- in which I further detail the requirements for such a patch.  There's also one
further issue I forgot about in that email: currently, site-packages eggs can
override the stdlib, and I didn't consider that requirement in the discussion.

Mark Sienkiwicz posted a patch which attempts to resolve this.

http://mail.python.org/pipermail/distutils-sig/2009-January/010768.html

This behavior change is unacceptable, as it makes it impossible to ensure that
an easy_install-ed package takes precedence over an existing,
distutils-installed version of the same package in the same PYTHONPATH directory.

Please note that that is the intended default behavior of easy_install: if you
wish to override it, you should use --multi-version, and explicitly select the
egg(s) to be added to sys.path instead.

Here is a patch to let elements of the PYTHONPATH environment variable maintain
precedence with regard to installed eggs, while still allowing installed eggs to
maintain their precedence with regard to installed non-eggs:

http://mail.python.org/pipermail/distutils-sig/2008-November/010487.html