It's probably because I've just subscribed to their weblog, but the Google App Engine team seems to be generating a lot of activity at the moment. In addition, it seems as that the platform itself is getting more attention. As a user of the service, there are some threads in all of that I'd like to tie together.
Most recently, the 1.19 release of the SDK brought urllib, urllib2 and httplib compatibility. This means that the sort of fixed I talked about for snaptrip, where I had to patch Beej's Python Flickr library, is no longer necessary- any web API module should work on GAE without needing any patches or special work on the part of the author.
1.19 also introduces a bulkloader and a remote data API. Personally, I seem to be able to get by without databases for most of the projects that end up live, but for the majority of other developers, a robust backup / restore service is a necessity. As yet, bulkloader is only half of the picture, but it indicates both parts of the problem are getting attention. Finally, 1.19 ups the request and response limits to 10MB from 1; useful for moderately-sized PDFs, for example.
Further away, an earlier post discussed some additions to the App Engine roadmap. For me, by far the most important is the promise of background tasks and task queues, which would be very useful for building a local cache of Flickr data. There's also mention of XMPP, which would be fun, and the ability to receive email, which I can see being useful also.
In the wake of these announcements, I've been asked: "is GAE ready for production?" I'd say the answer lies not with these features (although I'm sure some projects would require them), but with the continued beta status, and more concretely, the inability to pay Google money to use extra computing resources.
It is somewhat ironic that Google can evidently scale, and that App Engine is not only designed for scale, but enforces scaling on the design of your application, but that sites hosted on it can't take full advantage yet. Once the current limits go from being a brick wall to a toll gate, the site will be far more attractive for serious work, and I might even recommend it as production-ready.