I was experiencing the same issue as crt89. I worked through all the same steps, as well, and finally found the issue was a relative path reference in my .py script, needed to be an absolute path.
myConfig = ET.parse( 'foo.xml' ).getroot()
Needed to be updated to:
myConfig = ET.parse( '$SPLUNK_HOME/bin/scripts/foo.xml' ).getroot()
I was also running the python script via an .sh script to allow me to use python modules not included by splunk. Again, just as crt89 had outlined.
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