(disclaimer: I work for Google on Cloud Platform, but not on anything Java related)
Generally, I think what Google is missing (or doesn't care about) is that anyone who is using a PAAS provider is willingly exchanging some flexibility, control, and price-efficiency for the luxury of having devopsy management tasks taken off their hands in a competent and reliable manner. Managed VMs seem to be providing so little of that that you might as well move to IAAS. Or, do as I have, and move to Azure - who do manage to stay pretty current, and blend PAAS and IAAS in a much more elegant manner.
Please keep in mind that Managed VMs is still in beta, however, there are other parts of Google Cloud Platform that are in GA, including Compute Engine (IaaS), and Container Engine (somewhere between PaaS and IaaS). In fact, depending on how much control you want, Container Engine can be a better fit than App Engine.
Most of the pain points are in other areas. Like for example, the datastore API you have access to for Go doesn't even support geo-spatial data or queries. I had to hack my own solution. It made me pretty mad at the time, because how can you not support geospatial queries in a database in an age where mobile location-based apps are so ubiquitous.
So I can see why you would say the platform is stagnant. And there is probably some truth in what you are saying in terms of GAE not getting the same love as other parts of the Google Cloud.
But having said that, I STILL think there is some merit to building apps on GAE, if your app is a simple web server, or single purpose REST API. I have found that its pretty reliable, and its relatively cheap for what you get.
I've seen many Python apps that connect to a free MongoDB instance hosted on Mongolab.
(also worth noting that Node.js support for App Engine is currently in beta.)
(disclaimer: I work for Google on Cloud Platform)
Is this public? I have been waiting to hear this for ages! Great News.
I am planning a switch to node simply so I can run the same code on the front and back end. I was not looking forward to learning how to administer a server.