For me, the problem seems to be this changeset:
http://code.google.com/p/web2py/source/detail?r=143bbe9e11c1c66f6d932514c9918ad7410027b5

Light, if you are cloning Web2py with Mercurial (which is a good idea), you 
can specify exactly which version you want to be running like this: $ hg 
update [changeset]

So to set Web2py back to a version that works: $ hg update d4c2d8d15bb1

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