You're lucky I just happen to see this, otherwise I think it would be surprising you would have got an answer here. Anyway, this has nothing to do with python or blender. You are probably one of the many unlucky victims of the LF scripts many installation problems. You did run install.blend btw?
In any case the script is not designed to be used with anything else but the replacement lightflowPM module which translates it to a Lightflow internal format, python is not used for rendering. This allowed me to customize the LF python interface, and also make use of other python versions, bypassing 1.5, setMatrix_rm is not part of the standard python Lightflow interface. Also, python1.5 should not be installed on your system. The real lightflowPM module should be renamed by the install script, at least in the main LF directory, make sure there is no other copy hiding anywhere else. See the documentation.
So, what should happen when rendering (from blender or otherwise, WHEN installed succesfully) is that the replacement lightflow module is used which translates the output python script to the internal ascii format and then calls LFArender with it, an external program, to render the image.