I believe it's because I installed python using SciPy, so apparently it's not in the registry where the psycopg2 installer is looking. Anyway to fix this without installing python26 over the existing install? I'm not sure if that will corrupt it.
EDIT: My PYTHONPATH looks like the following:
'C:\\Python26\\scripts',
'C:\\Python26\\lib\\site-packages\\apptools-3.3.0-py2.6.egg',
'C:\\Python26\\lib\\site-packages\\blockcanvas-3.1.0-py2.6-win32.egg',
'C:\\Python26\\lib\\site-packages\\chaco-3.2.0-py2.6-win32.egg',
'C:\\Python26\\lib\\site-packages\\codetools-3.1.0-py2.6.egg',
'C:\\Python26\\lib\\site-packages\\configobj-4.6.0-py2.6.egg',
'C:\\Python26\\lib\\site-packages\\enable-3.2.0-py2.6-win32.egg',
'C:\\Python26\\lib\\site-packages\\enthoughtbase-3.0.3-py2.6.egg',
'C:\\Python26\\lib\\site-packages\\envisagecore-3.1.1-py2.6.egg',
'C:\\Python26\\lib\\site-packages\\envisageplugins-3.1.1-py2.6.egg',
'C:\\Python26\\lib\\site-packages\\ets-3.3.0-py2.6.egg',
'C:\\Python26\\lib\\site-packages\\etsdevtools-3.0.3-py2.6-win32.egg',
'C:\\Python26\\lib\\site-packages\\etsprojecttools-0.5.1-py2.6.egg',
'C:\\Python26\\lib\\site-packages\\mayavi-3.3.0-py2.6-win32.egg',
'C:\\Python26\\lib\\site-packages\\scimath-3.0.4-py2.6-win32.egg',
'C:\\Python26\\lib\\site-packages\\setupdocs-1.0.3-py2.6.egg',
'C:\\Python26\\lib\\site-packages\\traits-3.2.0-py2.6-win32.egg',
'C:\\Python26\\lib\\site-packages\\traitsbackendqt-3.2.0-py2.6.egg',
'C:\\Python26\\lib\\site-packages\\traitsbackendwx-3.2.0-py2.6.egg',
'C:\\Python26\\lib\\site-packages\\traitsgui-3.1.0-py2.6.egg',
'C:\\Python26\\lib\\site-packages\\python_twitter-0.6-py2.6.egg',
'C:\\Program Files (x86)\\OpenLibraries\\python',
'C:\\Python26\\python26.zip',
'C:\\Python26\\DLLs',
'C:\\Python26\\lib',
'C:\\Python26\\lib\\plat-win',
'C:\\Python26\\lib\\lib-tk',
'C:\\Python26',
'C:\\Python26\\lib\\site-packages',
'C:\\Python26\\lib\\site-packages\\PIL',
'C:\\Python26\\lib\\site-packages\\win32',
'C:\\Python26\\lib\\site-packages\\win32\\lib',
'C:\\Python26\\lib\\site-packages\\Pythonwin',
'c:\\python26\\lib\\site-packages',
'C:\\Python26\\lib\\site-packages\\wx-2.8-msw-unicode',
'C:\\Python26\\lib\\site-packages\\IPython/Extensions',