Try to upgrade distribute prior to the app running.

.ebextensions/python27.config

@@ -23,6 +23,9 @@ commands:
     command: grep "python2.7" 03deploy.py || sed -i 's/--distribute/--python=python2.7 &/' 03deploy.py
     cwd: /opt/elasticbeanstalk/hooks/appdeploy/pre
 
+  updatedistribute:
+    command: easy_install -U distribute
+
 container_commands:
   # Now that our app is installed using python2.7 we
   # need to fix some paths that the wsgi configuration

requirements.txt

@@ -9,6 +9,7 @@ Werkzeug==0.9.4
 argparse==1.2.1
 blinker==1.3
 boto==2.13.3
+distribute==0.6.28
 itsdangerous==0.23
 peewee==2.1.4
 py-bcrypt==0.4