After a lot of experimentation, this worked for me to build AND doctest using the local python:

cd Doc/
../python -m venv toolsenv
curl http://python-distribute.org/distribute_setup.py | toolsenv/bin/python
toolsenv/bin/easy_install pip
toolsenv/bin/pip install Sphinx
# EDIT conf.py: add 'toolsenv' to exclude_trees.
toolsenv/bin/sphinx-build -b html -d build/doctrees -D latex_paper_size=  . build/html
toolsenv/bin/sphinx-build -b doctest -d build/doctrees . build/doctest

The tool versions I got:

$ toolsenv/bin/pip list
distribute (0.6.35)
docutils (0.10)
Jinja2 (2.6)
Pygments (1.6)
Sphinx (1.1.3)

HTML: http://dl.dropbox.com/u/132894668/python3-Doc-build/html/index.html
The HTML has no significant differences vs the output of "make html".
It's mostly sphinx html tweaks.  The only user-visible diff I noticed is s/v3.4.0a0/3.4.0a0/.

The doctests are pretty horrible - 559 failed out of 1954!  (attached)
But it's better than 900+ failed with python 2 ("make doctest") and 700+ with python 3.2 that I originally tried via "apt-get install python3-sphinx"...

So let's update the tools ASAP, and start using PYTHON=../python.
The doctests won't get any love unless "make doctest" does the right thing out of the box.

Should I write a Makefile patch using the venv/install from pypi approach?
Or could somebody upload new versions to http://svn.python.org/projects/external/?
(Lack of access there was the reason I went the venv way.
IMHO the ease of future upgrades outweighs the concern of not depending on external sites, but I don't feel strongly about it.)