Would you mind explaining what the patch does in the PEP?

Not ready to be reviewed yet; I'm submitting this patch just to demonstrate some progress.

This version of the patch just removes the use of makesetup in building the interpreter, and hard-codes the presence of strop, posix, and _sre.  
Still to be done: write the top-level setup.py, and handle a few tricky bits such as the signalmodule.

I've made an updated version of the patch; because it's 55K, 
SF won't accept it, so I've put it at  http://www.mems-exchange.org/software/files/python/pep229.patch.  

There are only a very few things left to fix at this point:

* setup.cfg hard-wires the installation directory
because it has no access to a variable holding the installation prefix

* installs in subdirectories don't work because setup.cfg is only found in the current directory.

I think those are the only two remaining issues before this can be checked in (doubtless causing the sun to explode).

Checked in, so I'm going to close this patch.  Further discussion and development will occur in different patches/bug reports.

While working on the build so that Cygwin Python builds OOTB again, I
found the following issues now that Python is using Distutils
intrinsically:

1. setup.py needs to improve its ability to select only platform
appropriate modules.  I believe that this has already been discussed
on python-dev.
2. make install is not passing $(prefix) to setup.py so the standard
extension modules are always installed in the configured location and
cannot be overridden at install time.
3. make install fails during the regen step for platforms that do not
have a Lib/platform-foo in CVS.  This is due to PYTHONPATH no longer
being set correctly.
4. Most of the standard extension modules have different filenames (i.e.,
missing "module") than they had in 2.0.  For example on Linux, the
socket module was called _socketmodule.so -- now it is called _socket.so.

FYI, I have submitted the following patch:

http://sourceforge.net/patch/?func=detailpatch&patch_id=102409&group_id=5470

which has a Cygwin specific solution for 1 and platform independent
solutions for 2 and 3.

I just noticed your comment regarding setup.cfg, but maybe my "solution"
to 2 will prove useful anyway.