> Can you please try inserting that include <stdlib.h> and see if 10.5 
> builds readline?

This does not work out of trunk for me:

euclid:trunk minge$ sw_vers
ProductName:	Mac OS X
ProductVersion:	10.5.7
BuildVersion:	9J61
euclid:trunk minge$ svn diff
Index: Modules/readline.c
===================================================================
--- Modules/readline.c	(revision 78019)
+++ Modules/readline.c	(working copy)
@@ -6,6 +6,7 @@
 
 /* Standard definitions */
 #include "Python.h"
+#include <stdlib.h>
 #include <setjmp.h>
 #include <signal.h>
 #include <errno.h>
euclid:trunk minge$ make
-----------------------------------------------
Modules/Setup.dist is newer than Modules/Setup;
check to make sure you have all the updates you
need in your Modules/Setup file.
Usually, copying Modules/Setup.dist to Modules/Setup will work.
-----------------------------------------------
running build
running build_ext
building dbm using ndbm
building 'readline' extension
gcc -DNDEBUG -g -fwrapv -O3 -Wall -Wstrict-prototypes -I/Users/minge/Research/Languages/python/trunk/Mac/Include -IInclude -I./Include -I/usr/local/include -I/Users/minge/Research/Languages/python/trunk/Include -I. -c /Users/minge/Research/Languages/python/trunk/Modules/readline.c -o build/temp.macosx-10.4-i386-2.7/Users/minge/Research/Languages/python/trunk/Modules/readline.o
/Users/minge/Research/Languages/python/trunk/Modules/readline.c:42: error: conflicting types for ‘completion_matches’
/usr/include/readline/readline.h:172: error: previous declaration of ‘completion_matches’ was here
/Users/minge/Research/Languages/python/trunk/Modules/readline.c: In function ‘py_remove_history’:
/Users/minge/Research/Languages/python/trunk/Modules/readline.c:379: warning: passing argument 1 of ‘free’ discards qualifiers from pointer target type
/Users/minge/Research/Languages/python/trunk/Modules/readline.c: In function ‘py_replace_history’:
/Users/minge/Research/Languages/python/trunk/Modules/readline.c:416: warning: passing argument 1 of ‘free’ discards qualifiers from pointer target type
/Users/minge/Research/Languages/python/trunk/Modules/readline.c: In function ‘call_readline’:
/Users/minge/Research/Languages/python/trunk/Modules/readline.c:1033: warning: assignment discards qualifiers from pointer target type
/Users/minge/Research/Languages/python/trunk/Modules/readline.c:1036: warning: assignment discards qualifiers from pointer target type

Python build finished, but the necessary bits to build these modules were not found:
_bsddb             gdbm               linuxaudiodev   
ossaudiodev        spwd               sunaudiodev     
To find the necessary bits, look in setup.py in detect_modules() for the module's name.


Failed to build these modules:
readline                                              

running build_scripts

I am more than happy to run more tests with respect to this issue.  I am tired of seeing this build break everyday :)