pmuldoon: did you truncate the output of bt?  (or did the superior gdb you're using do this behind the scenes?  I know you hack on gdb itself, and this looks a superior gdb debugging an inferior gdb).

The reason for this error:

    Python Exception <type 'exceptions.IOError'> (2, 'No such file or directory', '<string>'): 

is that py-bt is attempting to print the line of source code that the frame is at, but the source was provided as a string, not a file, presumably due to a call to PyRun_SimpleString et al.

Python sets the filename of such code to be the dummy name "<string>", and py-bt attempts to use that as a real filename and open it, failing (unless you happen to have a file named "<string>" in which case it tries to list it).