This looks very good. You get access to Google's infrastructure: GFS, big table, email, etc. The IDE is cool: it only requires Python 2.5 to run.
I was too late to get one of the first 10,000 developer invites, but I am hopeful that before too long my turn will come :-)
The Google App Engine supports many Python web development frameworks like Django, CherryPy, Pylons, and web.py. I have only used CherryPy to any great extent, but Django has a good reputation, and I once worked through it's tutorial and it looked good (also, very good documentation). Google also supplies their own Python web application framework webapp.