Not upgrade yet to Python 2.5? Download PythonMac http://www.python.org/ftp/python/2.5/python-2.5-macosx.dmg and install it.
To compile anything with setup.py, you have to upgrade to the latest XCode. Get one from http://developer.apple.com/tools/ site. When installing/upgrading your XCode, please be sure you are installing latest Universal SDK. It is exactly needed by Python 2.5 (not sure for 2.4 though).
Install py2app if you want make standalone applications. More info is here: http://pythonmac.org/wiki/py2app and here is a documentation: http://svn.pythonmac.org/py2app/py2app/trunk/doc/index.html