(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.