I currently work with .NET exclusively and would like to have a go at python. To this end I need to set up a python development environment. I guide to this would be handy.
It's not that hard to set up a Python environment, and I've never had it muck up my .NET work. Basically, install Python --- I'd use 2.6 rather than 3.0, which is not yet broadly accepted --- and add it to your PATH, and you're ready to go with the language. I wouldn't recommend using a Ubuntu VM as your development environment; if you're working on Windows, you might as well develop on Windows, and I've had no significant problems doing so. I go back and forth from Windows to Linux with no trouble.
If you have an editor that you're comfortable with that has basic support for Python, I'd stick with it. If not, I've found Geany to be a nice, light, easy-to-use editor with good Python support, though I use Emacs myself because I know it; other people like SCITE, NotePad++, or any of a slew of others. I'd avoid fancy IDEs for Python, because they don't match the character of the language, and I wouldn't bother with IDLE (included with Python), because it's a royal pain to use.
Suggestions for libraries and frameworks:
Good luck, and welcome to a really fun language!
EDIT summary: I originally recommended Karrigell, but can't any more: since the 3.0 release, it's been continuously broken, and the community is not large enough to solve the problems. CherryPy is a good substitute if you like a light, simple framework that doesn't get in your way, so I've changed the above to suggest it instead.
NOTE: I included a lot of links to frameworks, projects and what-not, but as a new user I was limited to 1 link per answer. If someone else with enough reputation to edit wants/can edit them into this answer instead of the footnotes, I'd be grateful.
There are some Python IDE's such as Wing IDE[1], I believe some people use Eclipse[2] with a python plugin[3] as well. A lot of people in the #python channel of FreeNode seem to prefer vim, emacs, nano and similar text editors in favor of IDE's. My personal preffered editor is Vim, but if you've mostly done .NET development on windows, presumably with the usual Visual X IDE's, vim and emacs will probably cause you culture shock and you'd be better of using an IDE.
Nearly all python web frameworks* support the WSGI standard[4], most of the large web servers have some sort of plugin to support WSGI, the others support WSGI via fast cgi or plain cgi.
The Zope[5] and Django[6] frameworks have their own ORM's, of other ORM's the two most well known appear to be SQL Alchemy[7] and SQL Object[8]. I only have experience with the former, but both support all possible sane database choices, including SQLite which is installed together with Python and hence perfectly suited to testing and experimenting without polluting your .NET environment with 3rd part web servers and database servers.
The builtin unittest[9] and pyunit[10] frameworks seem to be the preffered solutions for unit testing, but I don't have much experience with these.
bpython[11] and ipython[12] offer enhanced interactive python shells which can greatly help speed up and testing small bits of code and hence worth looking in to.
As for a list of well known and often used web frameworks, look into the following frameworks**:
This is everything I can think of right now, I'll edit and add stuff if I can think of it. I hope this helps you some in the wonderful world of python.
* - The main exception would be Apache's mod_python, which you should avoid for exactly that reason, use mod_wsgi instead.
** - Word of warning, I have not personally used these frameworks this is just a very short impression I have gotten from talking to other people about each framework, it may be wildly inaccurate. (If anyone has any corrections, do comment and I'll try to edit and fix this answer).
(The http:// is missing since they're recognized as links otherwise)
[1] www.wingware.com/
[2] www.eclipse.org/
[3] pydev.sourceforge.net/
[4] wsgi.org/wsgi/
[5] www.zope.org/
[6] www.djangoproject.com/
[7] www.sqlalchemy.org/
[8] www.sqlobject.org/
[9] docs.python.org/library/unittest.html
[10] pyunit.sourceforge.net/pyunit.html
[11] www.bpython-interpreter.org/
[12] ipython.scipy.org/
[13] twistedmatrix.com/trac/
[14] pylonshq.com/
[15] www.cherrypy.org/
[16] turbogears.org/
If you've worked with Eclipse before you could give Pydev a try
Install the pre-configured ActivePython release from activestate. Among other features, it includes the PythonWin IDE (Windows only) which makes it easy to explore Python interactively.
The recommended reference is Dive Into Python, mentioned many times on similar SO discussions.