Having finally made the time and excuse to develop (virtualenv + Pylons) and deploy (with appengine-monkey) a very simple application on Google's App Engine, I'm thinking a little more about the support GAE could offer for geospatial apps. My keytree package works just fine on GAE (with xml.etree), so there's handy KML reading and writing. Simplejson, minus speed-ups, is good to go with GAE, and therefore so is geojson. Neither contain many files and so there's no harm in including them in each app (Pylons and its dependencies, on the other hand, eat up 80% of your file quota all by themselves). What's lacking is support for geometry operations and predicates, whether in the datastore API (ala GeoDjango/PostGIS), or in Python ala Shapely.
I can't believe that GEOS will ever be a part of GAE, but support for Java opens the door for JTS. I hope Martin Davis or somebody at OpenGeo grabbed one of the offered chances to try Java and will report on it. Would you have to use Jython to get at the JTS operations and predicates, or could you communicate via protocol buffers within your application? I do not know, being new to the platform, but would like to find out. Ideally, this kind of geospatial applications platform would allow you to create your own services for analyzing spatial features and share them with other applications if it wasn't going to provide them itself. Going over HTTP to a JTS-based geometry/topology service hosted in the same cloud would suck.