Hands-on With App Engine’s New Runtime
developers.google.com
developers.google.com
They want the wordpress crowd.
I think it's a very smart move. In the real world, outside of the startup bubble, there is a need for a simple, scalable php hosting that never gets slashdotted.
I do think there is enough an overload of PHP hosting though, even good php hosting, so the competition will be fierce.
And even then, GAE is more risky than, say, .Net - since you never actually buy the platform, you're subject to Google's changing prices and product priorities.
App Engine? If Google ever wanted to discontinue it, they would likely spin it off in some way. A company like Rackspace would surely be glad to take it off their hands.
http://www.jboss.org/capedwarf
Also, I recommend developing for App Engine as an educational experience. Building a good App Engine application may seem a little bit constrained, but it teaches you a lot about how to make something fault-tolerant and able to scale horizontally.
Edit: your point about node.js makes sense though.
Seriously, why not provide a migration path from Azure.