Appengine is good stuff because it offers cost reduction by not having to hire system administrator and it can scale automatically. This gives small startups edge, developers can write best applications and it just works.
As from other hand environment is pretty restrictive. When working with JSF it is especially difficult to get any well known AJAX framework to work like ICEFaces, RichFaces or OpenFaces. Cost of running applications is also relatively high per consumed unit. Can be compared to having lightly loaded servers in regular hosting.
As a conclusion i prefer putting in little more effort to host my own environment and as a reward only sky is the limit for me.
Keeping away from appengine but watching further developments.