Yes, cabal is the thing to steal. Improving distutils is worthwhile, but a temporary stop gap, most fundamental issues cannot be solved from improving distutils. Distutils itself is only 10 000 LOC of bad code, without good API, and you can reuse most setup.py from a conversion step.
It does not do much ATM, except for the conversion step: it can generates a static description of the package from existing setup.py. It reuses distutils to build package, but it does so from the declarative file, meaning that the whole thing is not tied to distutils anymore: distutils becomes an implementation detail.
I have started playing with a cabal-like project.
http://github.com/cournape/toydist
It does not do much ATM, except for the conversion step: it can generates a static description of the package from existing setup.py. It reuses distutils to build package, but it does so from the declarative file, meaning that the whole thing is not tied to distutils anymore: distutils becomes an implementation detail.