I just tried it here under Windows XP (using python 2.6.1 from
python.org) and the untabify dialog showed up with 8 as the default
number of columns per tab (although there are at least two bugs with
this dialog: i) I clicked on cancel but it still untabified the region;
ii) The window shows at a place before it is properly configured and
then shows up in its final place).

Also, from what I remember, IDLE always assume that a tab takes 8
columns and never modifies it. But the untabify dialog doesn't use this
fixed value, so it will vary depending on the code you run it (just
remembering again, with your bug.py it did show 8 here).

As for the real problem mentioned -- the differences in the visual,
regarding the indentation, between 2.5 and 2.6, I can't comment yet.