Thanks for the updates, Aaron.  The plot thickens!  If I perform the steps on a current macOS system, the result is:

273 pyexpat expat/xmlparse.c expat/xmlrole.c expat/xmltok.c pyexpat.c -I$(srcdir)/Modules/expat -DHAVE_EXPAT_CONFIG_H -DXML_POOR_ENTROPY=1 -DUSE_PYEXPAT_CAPI

which works just fine.  So it seems the underlying problem is actually a difference in the behavior of the makesetup shell script, most likely some difference in one of the utilities it uses, like sed, perhaps a BSD vs GNU difference.

I won't have more time to look into this further today but feel free to do so if you like.  In any case, we should fix the root problem in makesetup rather than trying to work around it elsewhere.