Repro steps:

Download http://appropriatesoftware.net/provide/docs/eternity-0.13.tar.gz (via 'eternity' module in PyPI) and look at the following command line session:

C:\Temp\tfbug>python27 -c "import tarfile as T; T.open('eternity-0.13.tar.gz').extractall()"
Traceback (most recent call last):
  File "<string>", line 1, in <module>
  File "C:\Python27\lib\tarfile.py", line 2046, in extractall
    self.extract(tarinfo, path)
  File "C:\Python27\lib\tarfile.py", line 2083, in extract
    self._extract_member(tarinfo, os.path.join(path, tarinfo.name))
  File "C:\Python27\lib\tarfile.py", line 2168, in _extract_member
    self.makelink(tarinfo, targetpath)
  File "C:\Python27\lib\tarfile.py", line 2260, in makelink
    raise IOError("link could not be created")
IOError: link could not be created

C:\Temp\tfbug>python26 -c "import tarfile as T; T.open('eternity-0.13.tar.gz').extractall()"

C:\Temp\tfbug>dir eternity-0.13
 Volume in drive C has no label.
 Volume Serial Number is 1877-E6BA

 Directory of C:\Temp\tfbug\eternity-0.13

10/14/2008  06:08 PM    <DIR>          .
10/14/2008  06:08 PM    <DIR>          ..
09/05/2008  01:31 PM               115 AUTHORS
10/14/2008  06:08 PM    <DIR>          bin
09/05/2008  01:31 PM                 0 CHANGES
09/05/2008  01:31 PM            17,998 COPYING
10/14/2008  06:08 PM    <DIR>          etc
09/05/2008  01:31 PM               447 INSTALL
09/11/2008  06:06 PM               231 MANIFEST.in
10/14/2008  06:08 PM               802 PKG-INFO
09/05/2008  01:31 PM               516 README
09/10/2008  04:10 PM             2,948 setup.py
10/14/2008  06:08 PM    <DIR>          src
               8 File(s)         23,057 bytes
               5 Dir(s)   3,493,781,504 bytes free

C:\Temp\tfbug>