Message 128988 - Python tracker
Yes, it does indeed look like stdin has been opened in binary mode. Just iterating over it also gives the spurious carriage returns:
C:\Python32>python
Python 3.2 (r32:88445, Feb 20 2011, 21:29:02) [MSC v.1500 32 bit (Intel)] on win32
Type "help", "copyright", "credits" or "license" for more information.
>>> import sys
>>> for line in sys.stdin:
... print(repr(line))
...
hello
'hello\r\n'
^Z
>>>