I am having exactly the same problem. I'm on Windows 7 64 bit. I searched my disk for Python and found 6,647 occurrences of the word. From the various names on the files I believe that I have versions 2.5, 2.6.1 and 2.6.6 as a result of installing web2py, OpenOffice, InkScape and Blender.
So when I clicked on the web2py.exe, what exactly did it do? Did it install Python 2.5 somewhere? (I found python25.dll in my download directory but not inside of the web2py folder.) Did it modify the Windows registry? Did it change any environment variables like "path"? Does it move any of the files or all they all *installed *in place? Once I clean up I think I'll try the source version. Peace, Rob:-]