I know that you can't call object.__setattr__ on objects not inherited from object, but is there anything else that is different between the two? I'm working in Python 2.6, if this matters.
Reading this question again I misunderstood what @paper.cut was asking about: the difference between classic classes and new-style classes (not an issue in Python 3+). I do not know the answer to that.
setattr(instance, name, value) is syntactic sugar for instance.__setattr__(name, value)**.
You would only need to call object.__setattr__(...) inside a class definition, and then only if directly subclassing object -- if you were subclassing something else, Spam for example, then you should either use super() to get the next item in the heirarchy, or call Spam.__setattr__(...) -- this way you don't risk missing behavior that super-classes have defined by skipping over them directly to object.
* applies to Python 3.0+ classes and 2.x new-style classes
**There are two instances where setattr(x, ...) and x.__setattr__(...) are not the same:
x itself has a __setattr__ in it's private dictionary (so x.__dict__[__setattr__] = ... (this is almost certainly an error)
x.__class__ has a __getattribute__ method -- because __getattribute__ intercepts every lookup, even when the method/attribute exists
NB These two caveats apply to every syntactic sugar shortcut:
setattrgetattrlenboolhash