I have ArcMap 10.0 and python is not appearing as a parser option in the label expression dialog box, only VBScript and JScript. Python is installed and the python window works fine.
Any idea how I can get this function?
New Label Expression parser
At ArcGIS 10.1 there has been a new label expression parser added. You can now use Python to add logic to your label expressions, including conditional logic and looping. For example, you could produce labels that have only the first letter of each word capitalized, regardless of how the text strings are stored in the attribute fields.
Consequently, to get access to this function you will need to upgrade to ArcGIS 10.1 (or later) for Desktop.