Pygame is still quite commonly used, and the most recent commit was in April, so I think it's too early to pronounce it dead (although pgreloaded, which at one point was intended to be a successor to pygame, is looking a bit dormant now).
A lot of folks also like pyglet, but I've never used it myself. I suspect it might also be overkill for you.
And yes, it's definitely possible to make games in Python. Go to pyweek.org and check out many of the awesome games that have been developed in Python in only one week.