I didn't check it myself, but the fix is released for python2.6
(2.6.2-0ubuntu2) karmic; urgency=low. You might want to try that out. I
see that you have 2.6.2-0ubuntu1...

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Python distutils installs into 'site-packages' instead of 'dist-packages' when 
a prefix is set
https://bugs.launchpad.net/bugs/362570
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