>> Not here.  When I remove the offending line it gets compiled.  So you
 >> probably should invent something more sophisticated ;-)
 >
 > Hmm... I must be missing something:
 >
 >      emacs-26-0% rm lisp/emacs-lisp/package.elc; make |& grep ELC
 >        ELC      emacs-lisp/package.elc
 >      emacs-26-0%
 >
 > this is with a vanilla checkout of the `emacs-26` branch.
 >
 > Can you show me the patch corresponding to "remove the offending line"?

The offending line is not in the Local Variables section but in the
'insert' call of 'package-quickstart-refresh'.

       (insert "
;; Local\sVariables:
;; version-control: never
;;\sno-byte-compile: t
;; no-update-autoloads: t
;; End:
"))))

The corresponding Makefile.in condition is

grep '^;.*no-byte-compile: t'

so I see no way that it would byte-compile this.

I attach I patch that fixes this here.

martin