I thought I'd pass on my recent experience deploying an app to GAE with Python 2.7. My motivation was the new features available, in particular concurrent requests and WSGI operation, and secondarily some other performance improvements (like the native JSON library). See http://code.google.com/appengine/docs/python/python27/newin27.html for more info.
There are a couple of downsides. 1. The App Launcher doesn't support 2.7 yet, so you need to deploy from the command line. I'm not entirely clear on whether there's any way at all to run a 2.7 app locally. 2. You must use the High Replication datastore. That's not necessarily a bad thing, but a) it's more expensive (if you have enough traffic to be paying), and b) run_in_transaction only works with ancestor queries, which the DAL does not support. Fortunately, my db requirements aren't too complicated, and I was able to put all my db accesses behind a class that allowed me to talk to the datastore through its native API while preserving compatibility with DAL on other servers. (There were some other advantages to doing this, and it was an interesting learning experience.) The trunk's app.example.yaml defaults to 2.7; that part was fairly simple (it supports 2.5 as well; just change some commenting-out stuff). I like the way GAE is going, and I really like being able to deploy an app in the cloud without having to become a sysadmin.
