Figure out how setup.py should actually work

[ryppl]

Right now we're installing in-development versions of distutils2 and pip by making them submodules and integrating their package installation into our setup.py. That's not really appropriate. There should be a way to get them both to be installed as dependencies rather than carrying them around as submodules, but I don't really understand distutils and setuptools and pip well enough to know how that should be done. distutils2 seems to be particularly troublesome because

1. its setup.py doesn't respond to the bdist_egg command, and ours tries to use that command on it during installation.
2. its setup.py is located in a subdirectory, so it isn't naturally found by setuptools.

[dabrahams]

Tarek said via IRC: “use install_requires=['distutils2'] then that's it!”
but it seems to fail http://gist.github.com/410269