I tried Blender 2.49b, and i got this error message, (although it “seemed” to be working), I got an error message in the console stating that python could not be found.
So I re-installed pythong just to make sure i got it, because after a bit of recon i couldn’t find anything about python on my machine… must have missed something. So for you others, make sure you installed it correctly and if the path where you installed python is :
C:\Python26;
it should be working,
Cheerio!