Python confusion installs in local user (virtualenv, pip, distribute)

I tried installing python below. But that did not work. This will take the "error: bad installation directory or PYTHONPATH".

What is the correct way to install pip, virtualenv, and the distribution for Python?

Make a directory

$ mkdir -p ~/.python

Add .bashrc

#Use local python
export PATH=$HOME/.python/bin:$PATH
export PYTHONPATH=$HOME/.python

Create ~ / .pydistutils.cfg file

[install]
prefix=~/.python

Get install script

$ cd ~/src
$ curl -O http://python-distribute.org/distribute_setup.py

Execution and error

$ python ./distribute_setup.py
Extracting in /tmp/tmpsT2kdA
Now working in /tmp/tmpsT2kdA/distribute-0.6.15
Installing Distribute
Before install bootstrap.
Scanning installed packages
No setuptools distribution foundrunning install
Checking .pth file support in /home/sane/.python/lib/python2.6/site-packages//usr/bin/python -E -c pass
TEST FAILED: /home/sane/.python/lib/python2.6/site-packages/ does NOT support .pth files
error: bad install directory or PYTHONPATH
You are attempting to install a package to a directory that is not
on PYTHONPATH and which Python does not read ".pth" files from.  The
installation directory you specified (via --install-dir, --prefix, or
the distutils default setting) was:
/home/sane/.python/lib/python2.6/site-packages/
and your PYTHONPATH environment variable currently contains:
'/home/sane/.python'
Here are some of your options for correcting the problem:
* You can choose a different installation directory, i.e., one that is 
on PYTHONPATH or supports .pth files
* You can add the installation directory to the PYTHONPATH environment 
variable.  (It must then also be on PYTHONPATH whenever you run 
Python and want to use the package(s) you are installing.)
* You can set up the installation directory to support ".pth" files by 
using one of the approaches described here:
http://packages.python.org/distribute/easy_install.html#custom-installation-locations

Please make the appropriate changes for your system and try again.
Something went wrong during the installation.
See the error message above.

My environment ("sane" is my unix username.)

$ python -V
Python 2.6.4
$ which python
/usr/bin/python
$ uname -a
Linux localhost.localdomain 2.6.34.8-68.fc13.x86_64 #1 SMP Thu Feb 17 15:03:58 UTC 2011 x86_64 x86_64 x86_64 GNU/Linux