Once I had problems building boost with vc-7_1 due to PATH environment variable "overflow". After vcvars32.bat added up to the PATH some directories in the beginning was truncated and lots of errors took place. I guess that checking of environment the bjam works in may help.
One thing that you might want to look into if you are on NT/2000/XP derivative is the way your environmental variables are set up. Open up Preferences from My Computer, go to Advanced, and then Environment Variables. Make sure you do not have anything in your user environment settings that might be masking system environment settings. If you have any LIB or INCLUDEs in your user environment variable, it can really mess you up in my experience. Merging those into the system variables and deleting them from user has helped fix some strange problems compiling for us.
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