I have been playing with the dis library to disassemble some Python source code, but I see that this does not recurse into functions or classes:
imp         
        Late answer but I would have been glad to find it when needed. If you want to fully disassemble a script with functions without importing it, you have to implement the sub_byte_code function mentioned in the question. This is done by scanning byte_code.co_consts to find types.CodeType literals.
The following completes the script from the question:
import dis
import types
source_py = "test.py"
with open(source_py) as f_source:
    source_code = f_source.read()
byte_code = compile(source_code, source_py, "exec")
dis.dis(byte_code)
for x in byte_code.co_consts:
    if isinstance(x, types.CodeType):
        sub_byte_code = x
        func_name = sub_byte_code.co_name
        print('\nDisassembly of %s:' % func_name)
        dis.dis(sub_byte_code)
And the result will be something like that:
  1           0 LOAD_CONST               0 (<code object foo at 0x02CB99C0, file "test.py", line 1>)
              2 LOAD_CONST               1 ('foo')
              4 MAKE_FUNCTION            0
              6 STORE_NAME               0 (foo)
  4           8 LOAD_NAME                0 (foo)
             10 LOAD_CONST               2 (42)
             12 CALL_FUNCTION            1
             14 STORE_NAME               1 (x)
             16 LOAD_CONST               3 (None)
             18 RETURN_VALUE
Disassembly of foo:
  2           0 LOAD_FAST                0 (n)
              2 UNARY_NEGATIVE
              4 RETURN_VALUE
Edit: starting from python 3.7, dis.dis disassembles functions and does this recursively. dis.dis has a depth additional argument to control the depth of function definitions to be disassembled. 
Import the file as a module and call dis.dis() on that module.
import dis
import test
dis.dis(test)
You can also do this from the command-line:
python -m dis test.py
Quoting from the documentation for dis.dis:
For a module, it disassembles all functions.
Edit: As of python 3.7, dis.dis is recursive.