I have spent quite a lot of time lately developing for google appengine. I must admit that it is really a great package, especially considering that is still in beta.
The development cycle is a breeze. One thing I would add though, would be a decent source code management system. This could take the form of an integration with google code. The appEngine dashboard does a good job keeping track of versions of your application, but if by accident you loose the code for your application (like having your laptop stolen for instance) you' re basically screwed.
Another ridiculous aspect of it is the 500MB of storage! why would a company that gives you 6+GB of email space not give you at least the same for your web app? Too bad they don't really have competition. Yes you can write your app in Django and all that, but Django, although more powerful as a development platform than the current version on GAE, does not offer such an efficient development and deployment cycle. Someone should work at creating an open source version of the GAE dashboard to help the deployment of Django apps. It would be a huge success.
My last wish is that I hope they will upgrade their internal version of Django to 1.0 as soon as the real Django 1.0 becomes production ready.