Bitcoin isn't running. I have full 777 permissions in that directory. If I rename wallet.dat to otherwallet.dat, and then run Bitcoin (to generate new wallet.dat file), then stop Bitcoin, then execute the exact same command, then it will work. Does this indicate a corrupted wallet.dat file?

Also, you may want to tell the user something before changing his wallet selection. When I went pywallet.py --walletdump --wallet=otherwallet.dat (the file I then renamed to wallet.dat) it just walletdumped wallet.dat because it couldn't read otherwallet.dat or something. That managed to confuse me a bit.