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I have used google app engine for several projects. Most recently for http://www.smstweet.in This basically helps Indian mobile phone users to update their twitter status by sending a simple SMS at negligible price.

Overall I feel GAE is very good to quickly validate your core ideas without having to worry about scalability at all. In SmsTweet I created the app in couple of days and as traffic grew, started optimizing little by little by using Tasks and Memcache. Yes there are a tonne of restrictions if you chose GAE, but there are decent workarounds for every one of them. You also have to learn stuff specific to GAE (datastore, tasks for example), but I guess they are trivial to pick up. And finally if your application does pick up traffic you can easily convert it to paid version and pay only for the extra traffic that you get. So a win win situation for you.

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