There's def find_vcvarsall(version): function (guess what, it looks for vcvarsall.bat) in distutils with the following comment
At first it tries to find the productdir of VS 2008 in the registry. If that fails it falls back to the VS90COMNTOOLS env var.
If you're not using VS 2008 then you have neither the registry key nor suitable environment variable and that's why distutils can't find vcvarsall.bat file. It does not check if the bat file is reachable through the PATH environment variable.
The solution is to define VS90COMNTOOLS variable to point to Tools directory of Visual Studio.
That being said take a look at 11.4. distutils.msvccompiler — Microsoft Compiler section in Python's docs which states
Typically, extension modules need to be compiled with the same compiler that was used to compile Python.
Martin v. Loewis in the email titled Download Visual Studio Express 2008 now on python-list mailing list states the same
Python 2.6, 2.7, and 3.1 are all built with that release (i.e. 2008). Because of another long tradition, Python extension modules must be built with the same compiler version (more specifically, CRT version) as Python itself. So to build extension modules for any of these releases, you need to have a copy of VS 2008 or VS 2008 Express.