Python 2.7 now fully supported on AppEngine
googleappengine.blogspot.in
googleappengine.blogspot.in
Now when it's official, GAE looks like a much more viable and cost-effective platform than it was for the few passing months.
Please, please roll out SSL on custom domains already. It's been just around the corner for years!
Of course this seems kind of ridiculous to me, if you aren't using the rpc's what the heck is your app actually doing?
So like everything, you need to test your application to see what configuration is right for you. For the app I maintain, python2.7 single threaded is only slightly slower than 2.5 but I expect that to improve over time and it was worth switching now just to not have to write for python2.5 anymore.
Costs are higher, but still less than leasing a data center and employing staff to maintain it.