IronPython 1.0 is available:

IronPython is a new implementation of the Python programming language running on .NET. It supports an interactive console with fully dynamic compilation. It is well integrated with the rest of the .NET Framework and makes all .NET libraries easily available to Python programmers, while maintaining full compatibility with the Python language.

Jim Hugunin explains the story IronPython here:

I started work on IronPython almost 3 years ago.  My initial motivation for the project was to understand all of the reports that I read on the web claiming that the Common Language Runtime (CLR) was a terrible platform for Python and other dynamic languages.  I was surprised to read these reports because I knew that the JVM was an acceptable platform for these languages.  About 9 years ago I’d built an implementation of Python that ran on the JVM originally called JPython and later shortened to Jython.  This implementation ran a little slower than the native C-based implementation of Python (CPython), but it was easily fast enough and stable enough for production use – testified to by the large number of Java projects that incorporate Jython today.

I wanted to understand how Microsoft could have screwed up so badly that the CLR was a worse platform for dynamic languages than the JVM.  My plan was to take a couple of weeks to build a prototype implementation of Python on the CLR and then to use that work to write a short pithy article called, "Why the CLR is a terrible platform for dynamic languages".  My plans quickly changed as I worked on the prototype, because I found that Python could run extremely well on the CLR – in many cases noticeably faster than the C-based implementation.  For the standard pystone benchmark, IronPython on the CLR was about 1.7x faster than the C-based implementation.

The more time I spent working on IronPython and with the CLR, the more excited I became about its potential to finally deliver on the vision of a single common platform for a broad range of languages.  At that same time, I was invited to come out to Microsoft to present IronPython and to talk with members of the CLR team about technical issues that I was running into.  I had a great time that day working through these issues with a group of really smart people who all had a deep understanding of virtual machines and language implementation.  After much reflection, I decided to join the CLR team at Microsoft where I could work with the platform to make it an even better target for dynamic languages and be able to have interesting technical discussions like that every day.

(Plain-old) Python already works quite well with the Microsoft Platform. However, I expect the best work Microsoft is doing these days revolves around .NET, so then next time I look to do Windows work in Python, I'm definitely going to have a look at IronPython.