What is wrong with Windows?

Short answer: nothing.
Details: The python distutils has some known issues in compiling C dynamic libraries if those are not a real Python C API, just a dynamic library called and used through the ctypes module. Unfortunately writing and using such a lib is really simple and comfortable otherwise.

Since in ImageP all functions exist in python form, and some has a C form as well, not being able to compile the C lib should not break the install. From version 0.291 and up the setup.py script is modified to try the compile and just skip the Csources.dll / Csources.so file if this step failed.
Recently there is a tweak in the setup script to try compiling with Visual Studio, and this script can be extended in the future to use other compilers as well (work in progress).

One can also try compiling the sources in the src folder manually and place the resulted Csources.dll into the c:\Python...\Lib\site-packages\ImageP folder (or wherever the install put the ImageP package). In python calling "import ImageP" sould give a message if the C sources -the dll file- was not found.

As by now (2012), the setup.py is tweaked to call the visual studio compilers and get the library generated and installed. Tested and working on a Win7 box.