The better way of doing this now is to use pip install with the -e option.
pip install -e .
It uses a directory with the setup.py file. The "." indicates this directory. This works the same way as the setuptools develop method.
I believe that the develop creates an egg link in your sight packages folder which points to the folder of the library. http://pythonhosted.org/setuptools/setuptools.html#develop-deploy-the-project-source-in-development-mode
python setup.py develop
I believe this is why you get the absolute path. There may be a conflict with a develop link and an install. Things could have also been moved.
For double clicking just have something that checks sys.argv. If there is no value for sys.argv[1] append build, install, or develop.
In addition, I've always heard that you want to import the modules then call the functions from the modules. from package import lib. lib.foo() that way you know where the method came from. I believe the import does the same thing for both ways; this may clean up your import. Python pathing and packaging can be a pain.
from package import lib
lib.foo()