I had the same terrors. Unfortunately I didn't document exactly how I  
did it, but my best recollection is that this will work:

1. Update setuptools: sudo easy_install -U setuptools

2. Download and unzip the tarball for psycopg2.

3. Edit the config file for psycopg2 as directed on other Web sites,
paying special attention to the pg_config argument (make sure it  
points to the right place in your /Library/PostgreSQL folder).

4. Run: sudo python setup.py install



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