This is biting people (including me :) so I'm going to try hard to get this fixed.  One user on the python-win32 mailing list resorts to rebuilding every 3rd party module he uses with this patch to get things working again (although apps which use only builtin modules or pywin32 modules - which already hacks this basic functionality in - don't see the problem.)

I'm attaching a different patch that should have the same default effect as Christoph's, but also allows the behaviour to be overridden.  Actually overriding it is quite difficult as distutils isn't setup to easily allow such compiler customizations - but at least it *is* possible.  To test this out I hacked both the pywin32 and py2erxe build processes to use those customizations and it works fine and allows them both to customize the behaviour to meet various modules' requirements.

Finally, this whole thing is still fundamentally broken for extensions which need a manifest (eg, to reference the common controls or the requestedExecutionLevel cruft).  These extension will still need to include the CRT reference in their manifest and thus will need a copy of the CRT next to each of them.  I *think* this also means they basically get a private copy of the CRT - they are not sharing the CRT with Python, which means they are at risk of hitting problems such as trying to share FILE * objects.  In practice, this means such modules are probably better of just embedding the CRT statically.  This is the route I've taken for one pywin32 module so the module can have a manifest and still work without a complete, private copy of the CRT needing to live next to it.  But even with that problem I think this patch should land.

It would be great if someone can review and test this version of the patch and I'll check it in.