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I think instead we may want to add a finalize() or close() method on frame objects which would clear all local variables (as well as dereference the globals dict, perhaps), after having optionally run a generator's close() method (if the frame belongs to a generator).
If I'm not mistaken, it should allow breaking reference cycles, and remove the need for complex traceback processing, which Twisted currently also does: http://twistedmatrix.com/trac/browser/trunk/twisted/python/failure.py#L89
Note that generator cleanup through the frame has a patch in issue17807.