getting a bit deeper into the compile log I found this:
building 'pyexpat' extension
i686-pc-linux-gnu-gcc -pthread -fPIC -fno-strict-aliasing -O2 -march=i686 -pipe -fwrapv -DNDEBUG -I. -IInclude -I./Include -I/usr/local/include -I/var/tmp/portage/dev-lang/python-2.7.3-r1/work/Python-2.7.3/Include -I/var/tmp/portage/dev-lang/python-2.7.3-r1/work/Python-2.7.3 -c /var/tmp/portage/dev-lang/python-2.7.3-r1/work/Python-2.7.3/Modules/pyexpat.c -o build/temp.linux-i686-2.7/var/tmp/portage/dev-lang/python-2.7.3-r1/work/Python-2.7.3/Modules/pyexpat.o
i686-pc-linux-gnu-gcc -pthread -shared -Wl,-O1 -Wl,--as-needed -L. -Wl,-O1 -Wl,--as-needed -L. -fno-strict-aliasing -O2 -march=i686 -pipe -fwrapv -DNDEBUG -I. -IInclude -I./Include build/temp.linux-i686-2.7/var/tmp/portage/dev-lang/python-2.7.3-r1/work/Python-2.7.3/Modules/pyexpat.o -L/usr/local/lib -L. -lexpat -lpython2.7 -o build/lib.linux-i686-2.7/pyexpat.so
*** WARNING: renaming "pyexpat" since importing it failed: build/lib.linux-i686-2.7/pyexpat.so: undefined symbol: XML_SetHashSalt
building '_elementtree' extension
i686-pc-linux-gnu-gcc -pthread -fPIC -fno-strict-aliasing -O2 -march=i686 -pipe -fwrapv -DNDEBUG -DUSE_PYEXPAT_CAPI -I. -IInclude -I./Include -I/usr/local/include -I/var/tmp/portage/dev-lang/python-2.7.3-r1/work/Python-2.7.3/Include -I/var/tmp/portage/dev-lang/python-2.7.3-r1/work/Python-2.7.3 -c /var/tmp/portage/dev-lang/python-2.7.3-r1/work/Python-2.7.3/Modules/_elementtree.c -o build/temp.linux-i686-2.7/var/tmp/portage/dev-lang/python-2.7.3-r1/work/Python-2.7.3/Modules/_elementtree.o
i686-pc-linux-gnu-gcc -pthread -shared -Wl,-O1 -Wl,--as-needed -L. -Wl,-O1 -Wl,--as-needed -L. -fno-strict-aliasing -O2 -march=i686 -pipe -fwrapv -DNDEBUG -I. -IInclude -I./Include build/temp.linux-i686-2.7/var/tmp/portage/dev-lang/python-2.7.3-r1/work/Python-2.7.3/Modules/_elementtree.o -L/usr/local/lib -L. -lexpat -lpython2.7 -o build/lib.linux-i686-2.7/_elementtree.so
*** WARNING: renaming "_elementtree" since importing it failed: PyCapsule_Import could not import module "pyexpat"
***********
The problem seems to be related to undefined symbol: "XML_SetHashSalt" But I do have expat-2.1.0 installed. And no lib or include files in /usr/local.
One weird thing I noticed. The libexpat files in my /usr/lib directory are version 1.6.0 and they were just installed last night, seemingly from the ebuild for expat-2.1.0! Indeed that is the case... I did a reinstall and that is exactly what it did.
Googling led to the discovery that a very similar problem has been reported as a bug (and purportedly fixed) on Debian
http://bugs.debian.org/cgi-bin/bugreport.cgi?bug=665346