We use python in quite a lot of embedded boards with ARM processors and 16 MB of RAM (running linux).
It works really well and is really easy to make custom code quickly - one of the strong points of python.
As for reliability of the code - we try to have 100% test coverage. Writing tests with python is very quick and it gives you a wonderful feeling of confidence. We use twisted trial to run the tests and report on coverage, but there are many other tools available.
In my experience python + tests is more reliable and much quicker to write than any other alternatives.
The only downsides for embedded work is that sometimes python can be slow and sometimes it uses a lot of memory (relatively speaking). This hasn't causes us a show stopping problem yet, and python is quite easy to profile for both speed and memory if it becomes a problem.
pychecker is a very useful too also which will catch quite a lot of common errors.
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