In his work to get Pylons running on Jython, Philip Jenvey had to first get setuptools running on Jython. I gave it a try with SQLAlchemy, by running
jython setup.py install
In my local copy from SQLAlchemy's svn repository, and it worked!
Watching Jython blossom again is cool, especially as it's happening absent of hype. I lurk on the dev and checkin lists, where there is a steady stream of checkins these days. Having languished for a while, there's now a confidence about the project. Best recent news of all is that they are moving away from Sourceforge infrastructure, to python.org's Roundup. That should make ticket management easier.