I don't think it applies here - the python apps don't download python code and then execute it, they are bundled with it (or the python compiles, I don't know).
This wording, taken at face value, means that you can't deploy a Python app. Assuming that the CPython interpreter would be the "Application" that is written using the iPhone SDK, then that Application would not be permitted to launch other executable code (i.e., your .py or .pyc files).
In fact, Sun has backpedaled on its plan to port Java to the iPhone because of this restriction: http://www.ericklein.com/2008/03/btw-i-love-apple.html