I've recently come across a problem which requires at least a basic degree of image processing, can I do this in Python, and if so, with what?
There is actually a wonderful Python Imaging Library (PIL). It gives you the ability to alter existing images, including anti-aliasing capabilities, and create new images with text and such. You can also find a decent introductory tutorial in the PIL handbook provided on the aforementioned site.
The best-known library is PIL. However if you are simply doing basic manipulation, you are probably better off with the Python bindings for ImageMagick, which will be a good deal more efficient than writing the transforms in Python.
If you are creating a custom image processing effect, you may find PythonPixels useful. http://halfhourhacks.blogspot.com/2008/03/pythonpixels.html It is intended for writing and experimenting with image processing.
I have done some basic image processing in PIL. You can check it out on my blog
http://prabhatgodse.blogspot.com/2009/10/fun-with-image-processing-in-python.html
Scipy has a whole package dedicated to image processing: scipy.ndimage. Scipy is in effect the standard general numerical calculations package.