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my two cents:

first of all, Lua's not object-oriented (right?).  One could easily
_make_ it object oriented, but then again one could add garbage
collection to C.  It all depends on how convenient it is to do.

anyway, I've some experience with both languages, and here's my

Lua is smaller, simpler, and faster than Python.
Python has _tons_ of libraries of extremely useful code written for
it. Lua has relatively fewer.
Both are easy to interface to C.

Both languages are excellent embedded languages (the two best, IMHO).
I think it boils down to whether you feel you need the extra builtin
functionality provided by Python.  If not, I'd go with Lua for its
speed and elegance.