Basically what happened is summarized on the django-hotclub page, which I apparently should start paying closer attention to:
http://code.google.com/p/django-hotclub/wiki/MovingToDistutils

What this all means is that you will need to change your setup a bit to get Pinax to work in its new setup… What I had to do first was install pip and virtualenv
sudo easy_install pip
sudo easy_install virtualenv

If you need to setup easy_install or you have any trouble with the following step, try updating python-setuptools
sudo apt-get install python-setuptools

You will also need to install git and bzr as mentioned in the wiki page. On my Ubuntu box, it was simple as installing git-core and bzr
sudo apt-get install git-core
sudo apt-get install bzr

After that you need to run the following command to download the apps (Feb 6, typo fixed, thanks Vernon):
sudo pip install -r pinax/requirements/external_apps.txt

And then back to your normal:
python manage.py syncdb
python manage.py runserver
(of course this is just on your dev box…)

hope that helps.