diff --git a/shell/sugar b/shell/sugar
index 16744ccc..9db77c7c 100755
--- a/shell/sugar
+++ b/shell/sugar
@@ -2,62 +2,27 @@
 
 import sys
 import os
-import pwd
-import random
-import tempfile
 
 import pygtk
 pygtk.require('2.0')
 
-def add_to_bin_path(path):
-	if os.environ.has_key('PATH'):
-		old_path = os.environ['PATH']
-		os.environ['PATH'] = path + ':' + old_path
-	else:
-		os.environ['PATH'] = path
-
-def add_to_python_path(path):
-	sys.path.insert(0, path)
-	if os.environ.has_key('PYTHONPATH'):
-		old_path = os.environ['PYTHONPATH']
-		os.environ['PYTHONPATH'] = path + ':' + old_path
-	else:
-		os.environ['PYTHONPATH'] = path
-
 curdir = os.path.abspath(os.path.dirname(__file__))
-basedir = os.path.dirname(curdir)
-
-if os.path.isfile(os.path.join(basedir, 'sugar/__uninstalled__.py')):
-	print 'Running sugar from ' + basedir + ' ...'
-	add_to_bin_path(os.path.join(basedir, 'shell'))
-	add_to_python_path(basedir)
-	add_to_python_path(os.path.join(basedir, 'shell'))
-	add_to_python_path(os.path.join(basedir, 'activities'))
-
-	from sugar import env
-	from sugar import setup
+sourcedir = os.path.dirname(curdir)
 
-	activities_dest = os.path.join(tempfile.gettempdir(), 'sugar')
-
-	if not os.path.isdir(activities_dest):
-		os.mkdir(activities_dest)
-	else:
-		# FIXME delete the whole directory
-		pass
-
-	setup.setup_activities(env.get_activities_dir(), activities_dest,
-						   os.path.join(basedir, 'shell/sugar-activity-factory'))
+if os.path.isfile(os.path.join(sourcedir, 'sugar/__uninstalled__.py')):
+	print 'Running sugar from ' + sourcedir + ' ...'
+	sys.path.insert(0, sourcedir)
 else:
 	print 'Running the installed sugar...'
-	from sugar import env
-	add_to_python_path(os.path.join(env.get_data_dir(), 'shell'))
-	add_to_python_path(os.path.join(env.get_data_dir(), 'activities'))
-	activities_dest = env.get_activities_dir()
+
+from sugar import env
+
+env.setup()
 
 from ActivityRegistry import ActivityRegistry
 
 registry = ActivityRegistry()
-registry.scan_directory(activities_dest)
+registry.scan_directory(env.get_activities_dir())
 
 from session.Emulator import Emulator
 
diff --git a/sugar/Makefile.am b/sugar/Makefile.am
index 2a06eb45..91a73622 100644
--- a/sugar/Makefile.am
+++ b/sugar/Makefile.am
@@ -7,7 +7,6 @@ sugar_PYTHON =				\
 	bots.py				\
 	env.py				\
 	setup.py			\
-	util.py				\
-	LogWriter.py
+	util.py
 
 EXTRA_DIST = __uninstalled__.py
diff --git a/sugar/__installed__.py.in b/sugar/__installed__.py.in
index 15e39a33..e93fd200 100644
--- a/sugar/__installed__.py.in
+++ b/sugar/__installed__.py.in
@@ -1,4 +1,8 @@
+sugar_source_dir = None
 sugar_data_dir = '@prefix@/share/sugar'
-sugar_activity_runner = '@prefix@/bin/sugar-activity'
 sugar_activities_dir = '@prefix@/share/sugar/activities'
 sugar_dbus_config = '@prefix@/share/sugar/dbus-installed.conf'
+
+sugar_python_path = ['@prefix@/share/sugar/shell',
+					 '@prefix@/share/sugar/activities]
+sugar_bin_path = []
diff --git a/sugar/__uninstalled__.py b/sugar/__uninstalled__.py
index a478e0c4..b34ffaf2 100644
--- a/sugar/__uninstalled__.py
+++ b/sugar/__uninstalled__.py
@@ -1,7 +1,16 @@
 import os
+import tempfile
 
-_source_dir = os.path.dirname(os.path.dirname(__file__))
+sugar_source_dir = os.path.dirname(os.path.dirname(__file__))
 
-sugar_data_dir = os.path.join(_source_dir, 'shell/data') 
-sugar_activities_dir = os.path.join(_source_dir, 'activities')
-sugar_dbus_config = os.path.join(_source_dir, 'dbus-uninstalled.conf')
+sugar_data_dir = os.path.join(sugar_source_dir, 'shell/data') 
+sugar_activities_dir = os.path.join(tempfile.gettempdir(), 'sugar')
+sugar_dbus_config = os.path.join(sugar_source_dir, 'dbus-uninstalled.conf')
+
+sugar_python_path = []
+sugar_python_path.append(sugar_source_dir)
+sugar_python_path.append(os.path.join(sugar_source_dir, 'shell'))
+sugar_python_path.append(os.path.join(sugar_source_dir, 'activities'))
+
+sugar_bin_path = []
+sugar_bin_path.append(os.path.join(sugar_source_dir, 'shell'))
diff --git a/sugar/env.py b/sugar/env.py
index cbfd6c84..6d5fba05 100644
--- a/sugar/env.py
+++ b/sugar/env.py
@@ -7,6 +7,8 @@ try:
 except ImportError:
 	from sugar.__installed__ import *
 
+import sugar.setup
+
 def add_to_python_path(path):
 	sys.path.insert(0, path)
 	if os.environ.has_key('PYTHONPATH'):
@@ -14,6 +16,25 @@ def add_to_python_path(path):
 	else:
 		os.environ['PYTHONPATH'] = path
 
+def add_to_bin_path(path):
+	if os.environ.has_key('PATH'):
+		old_path = os.environ['PATH']
+		os.environ['PATH'] = path + ':' + old_path
+	else:
+		os.environ['PATH'] = path
+
+def setup():
+	for path in sugar_python_path:
+		add_to_python_path(path)
+
+	for path in sugar_bin_path:
+		add_to_bin_path(path)
+
+	if sugar_source_dir:
+		source = os.path.join(sugar_source_dir, 'activities')
+		runner = os.path.join(sugar_source_dir, 'shell/sugar-activity-factory')
+		sugar.setup.setup_activities(source, get_activities_dir(), runner)
+
 def get_user_dir():
 	if os.environ.has_key('SUGAR_NICK_NAME'):
 		nick = get_nick_name()
diff --git a/sugar/setup.py b/sugar/setup.py
index 05dacb32..ba5d7501 100755
--- a/sugar/setup.py
+++ b/sugar/setup.py
@@ -48,7 +48,13 @@ def setup_activity(source, dest_path, bin):
 	fileobject.close()
 
 def setup_activities(source_path, dest_path, bin):
-	"""Scan a directory for activities and install them.""" 
+	"""Scan a directory for activities and install them."""
+	if not os.path.isdir(dest_path):
+		os.mkdir(dest_path)
+	else:
+		# FIXME delete the whole directory
+		pass
+
 	if os.path.isdir(source_path):
 		for filename in os.listdir(source_path):
 			activity_dir = os.path.join(source_path, filename)