With NLTK you can build classifiers, decision trees, and train/predict with bayesian classifiers similarly to Google's Prediction API examples. It's pretty easy to get started, and it's code that you run locally, so there is no network traffic.
I use it on http://www.protopub.com for classifying rss feed stories based on user feedback, so Protopub can recommend future stories that you might like. NLTK is far easier than rolling your own classifiers, but even that is not too difficult. See the O'Reilly book Programming Collective Intelligence.
I made Protopub to scratch the itch I think a LOT of us have. I am about a month away from a v1.0, and that's when I'll announce it on HN. Until then, I'm tweaking AI algorithms, fixing UI bugs, and making sure the back-end can handle the more than moderate traffic that HN will send. The few users I get from posts like this are enough to do some basic testing.
Anyway, I have some appreciation for the difficulties you must have encountered, and it doesn't please me but it will please you to know that at least from them you won't be having much competition.
Is it ok to start using your service? (not from an industrial espionage point of view but because it is useful!)
Right now, Protopub is an experiment, but it also serves as a beacon to other likeminded hackers in NYC, where I live, that I am interested in meeting others who want to create unique and technically savvy projects. It has done a good job of doing exactly that so far.
edit: hm, protopub.com proxies all requests ?
You can also run those distributively without much problems.
Original paper: http://www.cs.washington.edu/homes/pedrod/papers/kdd00.pdf
You should also look on http://www.cs.washington.edu/dm/vfml/