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I'm not sure what is meant by "everyone should install from
source or the native binary for his platform."  My
understanding is that Distutils was created to provide a
uniform way to install third party packages.

It seems that bdist_dumb has problems building a package
distribution which will install properly.  What about
non-Linux or Windows systems? It rather looks like the code
is unfinished....

To quote the TODO (DISTUTILS 1.1 PLANS):

"* bdist_dumb should grow a little intelligence: let
packager choose 
whether to make archive relative to prefix or the root
(prefix is essential for proper Windows support )"