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It seems related to the function ensure_relative
(distutils/dir_utils.py, line 217), that keeps the drive
name in the relative path built.

>>> ensure_relative("C:\\Python24")
"C:Python24"

It is called by bdist_dumb to manage the relative path
properly, but fails so.

I can't guess what was the original intent (maybe for some
other OS, maybe just a simple error?), but the following
change seems to fix the issue:

$ diff --from-file=dir_util.old.py dir_util.py
226c226
<             path = drive + path[1:]
---
>             path = path[1:]

(just skip the drive name and the initial os.sep if any).

The ensure_relative() function is only used by bdist_dumb,
so I believe this change is safe, unless the "bogus" line
had some hidden intent I couldn't figure (other OS???).