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Consider the following example unit test using assertAlmostEqual which uses the places argument as a positional argument, call this places.py:
import unittest
class Tests(unittest.TestCase):
 def test_equal_to_five_decimal_places(self):
 """Check assertAlmostEqual using decimal places"""
 self.assertAlmostEqual(0.123456789, 0.123456, 5)
if __name__ == "__main__":
 runner = unittest.TextTestRunner(verbosity = 2)
 unittest.main(testRunner=runner)
This works fine with Python 2.6.6 (Linux),
$ python2.6 places.py
Check assertAlmostEqual using decimal places ... ok
----------------------------------------------------------------------
Ran 1 test in 0.000s
OK
Trying 2to3 on it reports no changes needed:
$ 2to3 places.py
RefactoringTool: Skipping implicit fixer: buffer
RefactoringTool: Skipping implicit fixer: idioms
RefactoringTool: Skipping implicit fixer: set_literal
RefactoringTool: Skipping implicit fixer: ws_comma
RefactoringTool: No changes to places.py
RefactoringTool: Files that need to be modified:
RefactoringTool: places.py
Trying the test as is under Python 3.1.2 (Linux) fails:
$ python3.1 places.py
test_equal_to_five_decimal_places (__main__.Tests)
Check assertAlmostEqual using decimal places ... ERROR
======================================================================
ERROR: test_equal_to_five_decimal_places (__main__.Tests)
Check assertAlmostEqual using decimal places
----------------------------------------------------------------------
Traceback (most recent call last):
 File "places.py", line 5, in test_equal_to_five_decimal_places
 self.assertAlmostEqual(0.123456789, 0.123456, 5)
TypeError: assertAlmostEqual() takes exactly 3 positional arguments (4 given)
----------------------------------------------------------------------
Ran 1 test in 0.001s
FAILED (errors=1)
The test can be fixed to run on Python 3.1 (any Python 2.6) by supplying the places argument by name:
import unittest
class Tests(unittest.TestCase):
 def test_equal_to_five_decimal_places(self):
 """Check assertAlmostEqual using decimal places"""
 self.assertAlmostEqual(0.123456789, 0.123456, places=5)
if __name__ == "__main__":
 runner = unittest.TextTestRunner(verbosity = 2)
 unittest.main(testRunner=runner)
Note http://docs.python.org/library/unittest.html does not explicitly discuss passing places by name vs position. On the other hand, http://docs.python.org/py3k/library/unittest.html explicitly shows the by name form only.
I think the 2to3 script needs to be extended to use the places argument by name.

The change of places to a keyword-only argument in 3.x was reverted last week in py3k trunk.

Is 3.1 incompatible with 2.7 and 3.2? If so, is it best to have 3.2 compatible with 3.1 or to have 3.1 buggy?

It's fixed in release31-maint as well.