Currently it should work exactly the same as in distutils2, though the waters are somewhat muddied by setuptools' automatic manifest generation from version control.  I wonder if maybe d2to1 should just disable that functionality as it leads to inconsistent results when building a source distribution depending on whether or not the source was checked out from version control, and even if your particular VCS is supported (I've had no end in headaches related to this when I upgraded to SVN 1.7 which setuptools/distribute does not support natively).