diff --git a/Distribution/Client/SetupWrapper.hs b/Distribution/Client/SetupWrapper.hs
--- a/Distribution/Client/SetupWrapper.hs
+++ b/Distribution/Client/SetupWrapper.hs
@@ -321,8 +321,6 @@
   installedCabalVersion :: SetupScriptOptions -> Compiler -> ProgramConfiguration
                         -> IO (Version, Maybe InstalledPackageId
                               ,SetupScriptOptions)
-  installedCabalVersion options' _ _ | packageName pkg == PackageName "Cabal" =
-    return (packageVersion pkg, Nothing, options')
   installedCabalVersion options' compiler conf = do
     index <- maybeGetInstalledPackages options' compiler conf
     let cabalDep   = Dependency (PackageName "Cabal") (useCabalVersion options')
@@ -458,7 +456,9 @@
             , ghcOptObjDir          = Flag setupDir
             , ghcOptHiDir           = Flag setupDir
             , ghcOptSourcePathClear = Flag True
-            , ghcOptSourcePath      = [workingDir]
+            , ghcOptSourcePath      = case bt of
+                                      Custom -> [workingDir]
+                                      _      -> []
             , ghcOptPackageDBs      = usePackageDB options''
             , ghcOptPackages        = maybe []
                                       (\ipkgid -> [(ipkgid, cabalPkgid)])
diff --git a/bootstrap.sh b/bootstrap.sh
--- a/bootstrap.sh
+++ b/bootstrap.sh
@@ -126,7 +126,7 @@
                        # >= 0.2 && < 1.2
 NETWORK_VER="2.4.2.3"; NETWORK_VER_REGEXP="2\.[0-5]\."
                        # >= 2.0 && < 2.6
-CABAL_VER="1.20.0.3";  CABAL_VER_REGEXP="1\.2[01]\."
+CABAL_VER="1.20.0.4";  CABAL_VER_REGEXP="1\.2[01]\."
                        # >= 1.20 && < 1.21
 TRANS_VER="0.3.0.0";   TRANS_VER_REGEXP="0\.[23]\."
                        # >= 0.2.* && < 0.4.*
diff --git a/cabal-install.cabal b/cabal-install.cabal
--- a/cabal-install.cabal
+++ b/cabal-install.cabal
@@ -1,5 +1,5 @@
 Name:               cabal-install
-Version:            1.20.1.0
+Version:            1.20.2.0
 Synopsis:           The command-line interface for Cabal and Hackage.
 Description:
     The \'cabal\' command-line program simplifies the process of managing