(Users giving the software directly to someone else, rather than downloading from the official site, is probably covered by:
"""You also agree not to permit further distribution of the Redistributables by your end users except you may permit further redistribution of the Redistributables by your distributors to your end-user customers if your distributors only distribute the Redistributables in conjunction with, and as part of, the Licensee Software and you and your distributors comply with all other terms of this EULA."""
Where the users become our redistributors.)
Sounds like this puts all Python users in the clear, since Python is the Licensee Software in that case. So, anybody can distribute msvcr71 as "part of" Python.
OTOH, the other wording sounds like Python itself has to have a click-wrap, tear-open, or signature EULA! IOW, the EULA appears to prohibit free distribution of the runtime with a program that has no EULA.
So, in an amusing turn of events, the EULA actually appears to forbid the current offering of Python for Windows, since it does not have such a EULA.
This is a much bigger worry than the original question. If we're actually allowed to distribute Python with the runtime at all, then py2exe and such are perfectly safe, since it's in conjunction with permitted redistribution. If distribution of the runtime is not allowed, on the other hand, then use of MSVC 7 for Python becomes altogether impossible without adding some kind of click-wrap licensing scheme.
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