Sub-classes of sphinx.setup_command.BuildDoc may choose to call finalize_options in their run() method again for various reasons. However, currently this fails with py2.7 because of http://bugs.python.org/issue19570.
Since it is unlikely that the upstream issue will be solved, a workaround is to re-implement distutils' Command._ensure_stringlike to support Unicode strings.
I can't reproduce that situation as I mentioned at #1142.
However, if the source_dir option value was provided as a unicode object, this patch works as a workaround for the docutils issue without any side effects.