I just downloaded the version you are using, put the command in exactly as you did and it hung after:
New python executable in env/bin/python
But only for three seconds:
jeff@DeepThought:~/Downloads$ time python virtualenv.py --no-site-packages env
New python executable in env/bin/python
Installing setuptools...................done.
real 0m3.423s
user 0m0.260s
sys 0m0.030s
The installed the (easy_install) version I got from http://pypi.python.org/pypi/virtualenv did not hang at all:
jeff@DeepThought:~/Downloads$ time virtualenv --no-site-packages ENV
New python executable in ENV/bin/python
Installing setuptools.............done.
real 0m0.525s
user 0m0.450s
sys 0m0.050s
I'm not sure how long you waited before giving up. I would try installing the version from python.org to see if that one works better for you.