I built as root. (Trying 'make' as root produces the setuptools error.) Sorry, this is that output of the commands you gave:
root@Paloma:/sage-5.4.rc2# ls -al /sage-5.4.rc2/spkg/build/setuptools-0.6.16.p0/src total 224 drwxr-xr-x 6 1237 1237 4096 Oct 21 13:42 . drwxr-xr-x 5 1237 1237 4096 May 14 05:50 .. -rw-r--r-- 1 1237 1237 9265 May 20 2011 CHANGES.txt -rw-r--r-- 1 1237 1237 412 May 20 2011 CONTRIBUTORS.txt -rw-r--r-- 1 1237 1237 628 May 20 2011 DEVGUIDE.txt drwxr-xr-x 2 1237 1237 4096 May 20 2011 distribute.egg-info -rw-r--r-- 1 1237 1237 15757 May 20 2011 distribute_setup.py drwxr-xr-x 4 1237 1237 4096 May 20 2011 docs -rw-r--r-- 1 1237 1237 126 May 20 2011 easy_install.py -rw-r--r-- 1 1237 1237 7476 May 20 2011 launcher.c -rw-r--r-- 1 1237 1237 281 May 20 2011 MANIFEST.in -rwxr-xr-x 1 1237 1237 721 May 20 2011 msvc-build-launcher.cmd -rw-r--r-- 1 1237 1237 22652 May 20 2011 PKG-INFO -rw-r--r-- 1 root root 88711 Oct 21 13:42 pkg_resources.py -rw-r--r-- 1 1237 1237 7669 May 20 2011 README.txt -rw-r--r-- 1 1237 1237 435 May 20 2011 release.sh -rw-r--r-- 1 1237 1237 332 May 20 2011 setup.cfg -rw-r--r-- 1 root root 8133 Oct 21 13:42 setup.py drwxr-xr-x 4 1237 1237 4096 May 20 2011 setuptools -rw-r--r-- 1 1237 1237 2362 May 20 2011 site.py drwxr-xr-x 3 1237 1237 4096 May 20 2011 tests -rw-r--r-- 1 1237 1237 888 May 20 2011 test.sh root@Paloma:/sage-5.4.rc2# id -a uid=0(root) gid=0(root) groups=0(root) root@Paloma:/sage-5.4.rc2# umask 0022 -- You received this message because you are subscribed to the Google Groups "sage-devel" group. To post to this group, send email to sage-devel@googlegroups.com. To unsubscribe from this group, send email to sage-devel+unsubscr...@googlegroups.com. Visit this group at http://groups.google.com/group/sage-devel?hl=en.