With Subversion 1.5 entering alpha, I've been using it for more than just a few projects, and I've noticed that setuptools fails to run in a 1.5 working copy. For the short term, I've found that I can just modify the setuptools source to trust that version 9 WCs will work the same as version 8 WCs. The diff for that is attached.
Based on what I've read of subversion's README on the format of the entries file, the modification I've made should be just fine - the overall structure of the file is the same, there's just some new tags possible which will already not get stuck in the regex already in place. In my local testing, using setuptools for installing files works just fine with this patch in place.
Peace, Augie Fackler