> The archive is created, and the path in the archive is 
> 'C:\\testtarfile\\testtarfile.py', not 'test/testtarfile.py' 
> as I would expect.

I don't see the path you mention. Which archive manager do you use?
I tried with 7-zip, and it shows that I can browse to a path named
C:\testtarfile\tarfiletst.tar.gz\C:\testtarfile\tarfiletst.tar\test\
which contains testtarfile.py.

C:\testtarfile\tarfiletst.tar.gz contains
"C:\testtarfile\tarfiletst.tar", which itselfs contains
"test\testtarfile.py"

IOW, 7-zip simply fails to understand the .tar.gz format as a single
compressed archive.
To extract it properly, it's easy enough to browse the content until you
open the content of the .tar.