I spotted the problem on Vista Home Premium SP1 32bit

As John indicates the problem with the 'all users' install is that it
requires elevation to run as admin even if logged in as an
administrator. That is rather non obvious (John suggests running cmd.exe
as administrator which works fine). As most people doing it will be
developers and have own machine it is not a big issue (assuming use
py2exe, eggs etc. is used for end user setup ;-)) Oh I wonder if the
same problem exists there?

I ran into SxS problems on XP when building Python 2.5.? from source for
use in Mozilla XULRunner and needed to use VC8 Express for both (so same
CRT).  I moved on so never fully resolved it apart from dropping copies
of the CRT in various system folders.