I did some tests on the zip files which Frans attached to this post. The
reason you are getting errors is at least partly that you are not
following best practices in the test scripts. Specifically, the threads
are making system calls to update and delete blah.txt without handling
contention between them. Also, you are not joining on the created
threads before exiting the main thread, which means that the atexit code
will be invoked while the threads are still running. This is nothing
specifically to do with logging, except that logging registers an atexit
handler to close open files etc. So, you need to join the created threads.

I also found some mixture of tabs and spaces in the scripts Frans attached.

So, you need to test with the modified script which I am attaching here.
This script runs without problems on Ubuntu (Hardy/Python 2.5.2 built
Jul 31 2008 17:28:52 and Jaunty 2.6.2 built on Apr 19 2009 01:56:41).
There is still a problem on Windows, which appears to be related to an
error in os.rename. I am investigating this further to see if it is a
logging bug.