The symptoms are similar to those described in http://lists.boost.org/boost-testing/2007/02/3998.php (bjam cannot be found and then if bjam.exe is provided, you get the trace ending with the text below).  The cited thread provides a patch for problem in the earlier build.
 
# Searching for "process_jam_log" in "/cygdrive/c/temp/regression/tools_regressi
on/build"...
Traceback (most recent call last):
  File "run.py", line 51, in <module>
    runner(root)
  File "/cygdrive/c/temp/regression/tools_regression_src/regression.py", line 18
1, in __init__
    self.main()
  File "/cygdrive/c/temp/regression/tools_regression_src/regression.py", line 46
7, in main
    getattr(self,action_m)()
  File "/cygdrive/c/temp/regression/tools_regression_src/regression.py", line 42
4, in command_regression
    self.command_setup()
  File "/cygdrive/c/temp/regression/tools_regression_src/regression.py", line 28
0, in command_setup
    self.build_if_needed(self.process_jam_log,self.pjl_toolset)
  File "/cygdrive/c/temp/regression/tools_regression_src/regression.py", line 56
6, in build_if_needed
    tool[ 'build_path' ] = self.tool_path( tool )
  File "/cygdrive/c/temp/regression/tools_regression_src/regression.py", line 59
1, in tool_path
    , '\n'.join( [ name_or_spec[ 'path' ], build_dir ] )
Exception: Cannot find "process_jam_log" in any of the following locations:
/cygdrive/c/temp/regression/process_jam_log
/cygdrive/c/temp/regression/tools_regression/build