What is
do_action('setup_theme');
http://core.trac.wordpress.org/browser/tags/2.7.1/wp-settings.php#L544
and
add_action('setup_theme', 'preview_theme');
http://core.trac.wordpress.org/browser/tags/2.7.1/wp-includes/theme.php#L868
The add_action isn't even in a function. It's just hanging out in the file by itself.
The only other reference to setup_theme I could find is in the Codex here:
http://codex.wordpress.org/Plugin_API/Action_Reference
but it's not defined anywhere that I can see.
I ran into this while tracking down a bug in the preview theme functions. I think I finally figured out why themes with a hyphen '-' can't be previewed.