setuptools/sandbox.py:
class DirectorySandbox(AbstractSandbox):
    """Restrict operations to a single subdirectory - pseudo-chroot"""

When running user scripts it uses os.path.realpath(os.devnull) to include 'normalized' devnull to the allowed list of files in pseudo-chroot.

Yes, suggested patch returns realpath behavior from 3.7 and packages installs normally.

C:\Users\User\Downloads>py -3.7 -c "import os.path;print(os.path.realpath('nul'))"
\\.\nul

C:\Users\User\Downloads>py -3.8 -c "import os.path;print(os.path.realpath('nul'))"
\\.\nul

I think it must be included in 3.8 or windows users will get installation problems.