It would be really nice if test_distutils showed any failures, but it doesn't so any assistance would be welcome. At this point I can't even replicate the failure in a simpler test :-(
My guess is that it's the environment; if not that, the working directory. Assuming you have already instrumented ccompiler.CCompiler.spawn, I suggest to dump os.environ and print os.getcwd(). Assuming you really meant that you run under Cygwin Python (instead of just using --compiler), you might want to instrument spawn._spawn_posix instead.
When you say you extracted _spawn_all from distutils/spawn.py: what version of Python are you talking about? I can't find _spawn_all in the sources of 2.5.x, or 2.6.