The scenario is: I am on Ubuntu 11 which comes with Python 2.7, I want to run Mozilla JetPack which supports Python 2.5/2.6 and Google App Engine which only supports Python 2.5
You don't need to do anything fancy outside the virtualenv wrapper. Just use the --python=python2.5 flag (check out the man page for virtualenv form more). It does not matter what version you install it with, you just have to select the right executable for python in the virtual environment.
e.g. mkvirtualenv --python=python2.5 --distribute python25 if the python flag fails, either add a symlink (ln -s) to python25 in your $PATH or use the full path name on the python flag.
Also, default for multiple python installations is to have, for all 'altinstall' versions, a separate python and easy_install. So, for example: python2.5 ,easy_install-2.5 ,python2.6, easy_install-2.6 etc.