Recusive function inside a function can't find itself.

[Jeremy Hylton]

Python does not have nested scopes.  Each function looks in two
environments for name bindings -- its locals and its globals.  The
fact that the funcion in question is nested inside another function is
ignored in Python.  This implies a requirement that all recursive
functions be defined at the top level.  (In most Python code, all
functions are defined at the top level.)

And before you ask :-) -- You could spend the rest of the weekend
reading old threads about whether this should be changed.  If you're
interested check out DejaNews or the archives at Python.org.

Jeremy