Arbie, Is PIL pure python? i'm not sure you can use it with GAE as it is C based (i think), though GAE does provide it's own image manipulation library.
for pure python packages you don't need the web shell to install them, just copy their python files to web2py/site-packages and restart GAE. you are good to go. I have not tried to use the web2py shell with GAE so i don't know how to answer that part of your question. sorry. christian
