I think your configuration must be a bit off. I ran your spyce file on my apache (2.0.40), mod_python (3.0.1-4) and spyce (1.3.12) server and it displayed properly:
Hello world! 0 1 2 3 4 5 6 7 8 9
As far as Apache goes, here is my working spyce config:
AddHandler python-program .spy
Your spyce config looks fine. Is it possible that you have an additional handler for .spy files? Seems unlikely, but you never know. Also, on recent Redhat distros, the default Apache config uses /etc/httpd/conf.d/python to initialize mod_python. Make sure you're not also starting mod_python in /etc/httpd/conf/httpd.conf which might cause some problems (at the very least, upon restarting apache you would see a message stating that "mod_python" was already loaded).
Hopefully this will give you a starting point. Good luck.
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