AFAIK the problem with running existing PHP apps on App Engine isn't the PHP part. It's the rest of their architecture. I've only ever seen two kinds of PHP apps: The ones that are tightly coupled to the LAMP stack or a very close equivalent, and the ones that should have been written in some other language.
But maybe someone else can enlighten me.
This is huge.
Take Jython for example: Put jython.jar in WEB-INF/lib/, add a small stanza to WEB-INF/web.xml, write a WSGI-compliant app in Python. When you're done, you can zip it up and deploy it on Tomcat. None of the existing infrastructure needs to change, and you get to write in a more expressive language. That's how we'll sneak better things into enterprise.
"Content cache and session management don't work." That's a pretty big drawback for me. Are there any performance issues?
Caucho says that the real gain is taking advantage of built-in advanced features of Resin App Server like load balancing. Without porting MySql, PHP on GAE means little.
Why is Vendor Lock-in okay with Google's proprietary platform, but not with Microsoft's?
If you're worried about lock-in with App Engine, check this out: http://code.google.com/p/appscale/ As you can see, Google is one of the supporters of this project, although it's not clear exactly what they have contributed.
Quercus claims to be able to run "MediaWiki, Drupal, Wordpress, Gallery2 and DocuWiki" on their site, and equivalent performance to a PHP deployment with APC. Which is pretty impressive, if true.