Our python installation was configured using --prefix and --exec-prefix. Distribute is looking under sys.prefix for the Makefile, when it should be looking under sys.exec_prefix.
I see this when trying to install distribute:
Now working in /tmp/tmpihrj3Y/distribute-0.6.15 Installing Distribute running install error: invalid Python installation: unable to open /our/prefix/lib/python2.6/config/Makefile (No such file or directory) Something went wrong during the installation. See the error message above.