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The following patch fixes it. The end-of-file indicator is still set,
fgets returns NULL when ctrl-c is pressed, and the code checks for
feof(fp) which is true. PyErr_CheckSignals() isn't called.
This patch calls clearerr on the filepointer and consequently after
ctrl-c feof(fp) is false and PyErr_CheckSignals is called.
What I don't understand is why the backtrace says the KeyboardInterrupt
happens in raw_input. PyErr_CheckSignals must be called on the "pass"
statement otherwise something would be fundamentally broken (But I guess
then python somehow saves the last real bytecode command).
~/Python-2.5.1/ hg diff 
diff --git a/Parser/myreadline.c b/Parser/myreadline.c
--- a/Parser/myreadline.c
+++ b/Parser/myreadline.c
@@ -44,6 +44,7 @@ my_fgets(char *buf, int len, FILE *fp)
 if (PyOS_InputHook != NULL)
 (void)(PyOS_InputHook)();
 errno = 0;
+ clearerr(fp);
 p = fgets(buf, len, fp);
 if (p != NULL)
 return 0; /* No error */