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It turned out to be a patch problem (something I've never
encountered before):

% patch -p0 < /home/titan/skipm/Desktop/setup.py\(2\).patch
patching file setup.py
Hunk #2 succeeded at 1361 with fuzz 2.

I tried deleting setup.py, svn up'ing and reapplying the
patch a couple other times.

When I manually compared the new setup.py with the diff
file I saw that the stuff below the "Is this still needed?"
line wasn't actually applied.

I manually updated setup.py from the diff file (good
thing it was a simple diff!)  It now builds properly.
Thanks for all the work you put into this, Thomas.

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