As reported at https://bugs.launchpad.net/pyopenssl/+bug/236190 ,
tarfile.py incurs an "Operation not permitted" exception (on Mac OS
10.4) when it tries to untar the pyOpenSSL-0.6.tar.gz tarball, because
that tarball has directories in it marked as having the "g+s" bit.

(Why this leads to an "Operation not permitted" exception, I don't know.)

I can't reproduce this. If I do

py> import tarfile
py> t=tarfile.open("pyOpenSSL-0.6.tar.gz","r:*")
py> t.extractall()
py>

it extracts just fine, and sets the s-bits. I've used the file at

http://downloads.sourceforge.net/pyopenssl/pyOpenSSL-0.6.tar.gz?modtime=1092355200&big_mirror=0

With some effort I could reproduce the problem (on a FAT32 filesystem),
but what we have here is clearly a usage problem. In unpack_tarfile() in
setuptools/archive_util.py TarFile's internal _extract_member() method
is used to extract the contents. For every non-fatal error (like a
failing chmod()) _extract_member() raises an ExtractError exception. In
TarFile.extract() these ExtractErrors are normally ignored. The
unpack_tarfile() function in setuptools needs some fixing, it should
either act more like TarFile.extract() or better use the public API.