Just realized that paver (v1.0.3) [and possibly up to 1.1] will not work normally in a WinXP machine running python 2.7.3 and up.
A bit of googling around and i found that the actual reason for this is because of this issue
Now since paver uses its own custom version of the super cool path.py module, the above link and its patch have not been merged into production.
There is a merge that was made into paver a year ago [ issue 16 0n paver] but this is not the latest version of path.py
The only work around to get your build scripts working on an XP machine on py2.7 now is to hot patch your paver's path.py with the following changes
Hope this helps other people who are breaking their head right now on the same problem.
Also, am wondering alound, how much would it take to rewrite the path.py paver so that it uses the original path.py and then a wrapper around it to make it paver specific.