Original notes file, setup_notes.txt.
Streamlined process followed this time was efficient and effective. Kenneth Reitz' hitchhiker's guide Windows setup is the way to go.
The guide takes you through python download, setuptools and pip install. Use pip to install virtualenv.
pip install virtualenv
Documentation for virtualenv here.
In this case I also needed BeautifulSoup. A particular script required the lxml parser library. For whatever reason "pip install lxml" did not work during this attempt nor previous ones. In previous attempts when not using virtualenv (there were many as Python continued to get messed up with each ArcGIS update) I downloaded the lxml_whateverversion.exe and ran the executable. The registry recognized python installation worked fine. In earlier cases these were ArcGIS installed flavors of Python. In this attempt I had both the ArcGIS flavor and the latest version, both showed up when running the .exe but I needed to install lxml in my virtual environment specific to the project. I found my answer here with more detail in the link provided in the first answer by Piotr Dobrogost.
Ran "easy_install whatever.exe" while in the virtual environment.
04-11-2014
Encountered this issue previously when trying to install lxml. When attempting to pip install matplotlib and numpy, received error: "Unable to find vcvarsall.bat". Previously solved by running executable in virtualenv as mentioned above. Worked fine with matplotlib but numpy file downloaded from numpy.org returned the error, "not a valid Windows .exe". Package downloaded here installed successfully. Used win32 version for Python 2.7. Initially tried amd64 without any luck.
Tried to create a simple plot and received the following error message after a long traceback, "This probably means that Tcl wasn't installed properly.". This link has the answer. Tcl does get copied into virtualenvs. Just need to copy the 'tcl' directory from main Python directory into root folder of virtualenv.