Alternatives to mod_python's CGI handler
You could always write your own handler, which is the way mod_python is normally intended to be used. You would have to set some HTTP headers (and you could have a look at the publisher handler's source code for inspiration on that), but otherwise I don't think it's much more complicated than what you've been trying to do.
Though as long as you're at it, I would suggest trying mod_wsgi instead of mod_python, which is probably eventually going to supersede mod_python. WSGI is a Python standard for writing web applications.
I'm looking for the simplest way of using python and SQLAlchemy to produce some XML for a jQuery based HTTP client. Right now I'm using mod_python's CGI handler but I'm unhappy with the fact that I can't persist stuff like the SQLAlchemy session.
The mod_python publisher handler that is apparently capable of persisting stuff does not allow requests with XML content type (as used by jQuery's ajax stuff) so I can't use it.
What other options are there?