Should setuptools be in the setup_requires entry of setup.cfg files in Python?

The accepted answer is mostly correct, but where PEP 518 says.

[The setup_requires mechanism] cannot include setuptools itself...

It's technically incorrect, and as importlib_resources demonstrates, it can actually include setuptools. The problem is that including setuptools in setup_requires serves mostly as documentation. It declares that setuptools is a build requirement (required to run setup.py), but it won't be capable of satisfying that requirement if it's not already satisfied.

But, the presence of setuptools in setup_requires is technically correct and does serve the purpose of declaring the requirement and asking setuptools to verify that the requirement is in fact installed (alongside other setup-time requirements).

It is, however, just a legacy artifact and doesn't provide that much value, and as can be seen in the question and answers, it does lead to confusion. The recommended, proper, approach is to use PEP 517 and 518 declarations and builders, but that part of the ecosystem hasn't matured yet, so setuptools vestiges will remain. Try not to let them bother you.

No, setuptools should not be included in setup_requires, according to PEP 518 (bold emphasis mine):

Setuptools tried to solve this with a setup_requires argument to its setup() function [3]. This solution has a number of issues, such as:

• No tooling (besides setuptools itself) can access this information without executing the setup.py, but setup.py can't be executed without having these items installed.
• While setuptools itself will install anything listed in this, they won't be installed until during the execution of the setup() function, which means that the only way to actually use anything added here is through increasingly complex machinations that delay the import and usage of these modules until later on in the execution of the setup() function.
• This cannot include setuptools itself nor can it include a replacement to setuptools, which means that projects such as numpy.distutils are largely incapable of utilizing it and projects cannot take advantage of newer setuptools features until their users naturally upgrade the version of setuptools to a newer one.
• The items listed in setup_requires get implicitly installed whenever you execute the setup.py but one of the common ways that the setup.py is executed is via another tool, such as pip, who is already managing dependencies. This means that a command like pip install spam might end up having both pip and setuptools downloading and installing packages and end users needing to configure both tools (and for setuptools without being in control of the invocation) to change settings like which repository it installs from. It also means that users need to be aware of the discovery rules for both tools, as one may support different package formats or determine the latest version differently.

Why does setup_requires includes setuptools? This does not seem to make sense

Does not make sense at all. On the other hand it doesn't hamper anything so why not?