Q:

How is the default PATH set?

On another linux system I might expect to find a .profile file, or something in /etc used by default. I'm unable to determine what sets the system path for processes not running in a shell.

A:

It appears to be defined in /init.rc, at least on my device:
export PATH /sbin:/system/sbin:/system/bin:/system/xbin
I don't think you can edit this file directly though, even with root access, because it is part of the read-only boot image, not the /system partition. If you want to edit it then I guess you would have to unpack, edit and re-pack the boot image as described here:
http://android-dls.com/wiki/index.php?title=HOWTO:_Unpack%2C_Edit%2C_and_Re-Pack_Boot_Images
I haven't tried this though.

