The problem is that by writing super(MyClass, self).__init__(text), you are saying to use the super relative to whatever class MyClass refers to at the time super is called.  But the decorator replaces MyClass with a subclass of itself.  So when your original __init__ method is called MyClass actually refers to a subclass of the class which defines the executing method.
To say it step by step, I'm going to call the original class (as written in the source) OrigMyClass, and the resulting version (after the decorator) DecMyClass.  I'll use MyClass just as a variable, because its meaning changes during the course of execution.
- You define an - __init__method on- OrigMyClass, but that- __init__method calls- super(MyClass, self), not- super(OrigMyClass, self).  Thus, what method will actually be called depends on what- MyClassrefers to at the time the method is called. The value of- MyClassis looked up at execution time like any other variable; placing it inside the- supercall or inside the- __init__method does not magically bind it to the class it happens to be in when you write it; variables in functions are evaluated when they are called, not when they are defined.
 
- The decorator runs.  The decorator defines a new class - DecMyClassas a subclass of- OrigMyClass.- DecMyClassdefines an- __init__that calls- super(DecMyClass, self).
 
- After the decorator runs, the name - MyClassis bound to the class- DecMyClass.  Note that this means that when the- super(MyClass, self)call later executes, it will be doing- super(DecMyClass, self).
 
- When you do - MyClass(111), you instantiate an object of- DecMyClass.- DecMyClass.__init__calls- super(DecMyClass, self).__init__.  This executes- OrigMyClass.__init__.
 
- OrigMyClass.__init__calls- super(MyClass, self).__init__.  Because- MyClassrefers to- DecMyClass, this is the same as- super(DecMyClass, self).__init__.  But- DecMyClassis a subclass of- OrigMyClass.  The key point is that because- MyClassrefers to- DecMyClass,- OrigMyClassis actually calling super on a subclass of itself.
 
- Thus - super(DecMyClass, self).__init__again calls- OrigMyClass.__init__, which again calls itself, and so on to infinity.
 
The effect is the same as this code, which may make the execution path more obvious:
>>> class Super(object):
...     def __init__(self):
...         print "In super init"
...         super(Sub, self).__init__()
>>> class Sub(Super):
...     def __init__(self):
...         print "In sub init"
...         super(Sub, self).__init__()
Note that Super calls super(Sub, self).  It is trying to call a superclass method, but it tries to call the superclass method of Sub.  The superclass of Sub is Super, so Super winds up calling its own method again.
Edit: Just to clarify the name-lookup issues you raised, here's another slightly different example that has the same result:
>>> class Super(object):
...     def __init__(self):
...         print "In super init"
...         super(someClass, self).__init__()
>>> class Sub(Super):
...     def __init__(self):
...         print "In sub init"
...         super(Sub, self).__init__()
>>> someClass = Sub
This should make it clear that the class argument to super (the first argument, here someClass) is not special in any way.  It is just an ordinary name whose value is looked up in the ordinary way at the ordinary time, namely when the super call is executed.  As shown by this example, the variable doesn't even have to exist at the time you define the method; the value is looked up at the time you call the method.