The problem seems to be setup tools.

Download the tar.gz version, ex:
http://pypi.python.org/packages/source/s/setuptools/setuptools-0.6c11.tar.gz
and install it with:

python2.6 setup.py build and python2.6 setup.py install

Once I did this my error went far far away. Hope this helps.

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"All the exaggerations are right, if they exaggerate the right thing." GKC
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