python setup.py build
Traceback (most recent call last):
File "setup.py", line 28, in <module>
from setuptools import setup, find_packages, Extension
ImportError: No module named setuptools
Yes, Deluge is 2.6 compatible. It seems to me you need to install setuptools. There is a chance you have installed setuptools in the past, but only for python 2.5, not 2.6.