On Windows, PyOS_CheckStack is supposed to protect the interpreter from
stack overflow. But doing this, it always crashes when the stack is
nearly full.

The reason is a bad check of the return value of _resetstkoflw():
according to MSDN, the return value is "Nonzero if the function
succeeds, zero if it fails.":
http://msdn.microsoft.com/en-us/library/89f73td2.aspx

The patch below is enough to replace the "Fatal Python error: Could not
reset the stack!" into a "MemoryError: stack overflow" exception.

Tested with:
>>> loop = None,
>>> for x in xrange(100000): loop = {'x': loop}
...
>>> len(repr(loop))



Index: Python/pythonrun.c
===================================================================
--- Python/pythonrun.c  (revision 66486)
+++ Python/pythonrun.c  (working copy)
@@ -1749,7 +1755,7 @@
                        EXCEPTION_EXECUTE_HANDLER :
                        EXCEPTION_CONTINUE_SEARCH) {
                int errcode = _resetstkoflw();
-               if (errcode)
+               if (errcode == 0)
                {
                        Py_FatalError("Could not reset the stack!");
                }

This issue may be related: issue1069092

Yes, issue1069092 is another case where PyOS_CheckStack is exercised. 
But this other issue was first reported on Unix, when PyOS_CheckStack is 
currently implemented only for Windows.

See also issue #3999: I wrote a new generic handler for stack 
overflow "exception".

The patch is fine, please apply it to all versions from 2.6 to 3.0.

Committed r67343 (trunk) and r67344 (release26-maint)