There might be some problems but it's great to know that Google system administrators (instead of me) are taking care of it. When I hosted my application on EC2 twice I almost lost all my files due to hardware problems. I had to spend all night preparing a new server, not funny. There are no servers to fail in App Engine, I love that!
For what it's worth, we're an angel funded startup with some extremely bright hackers and we were signing praises about the App Engine until about 3 months in, when we started hitting it's various brick walls.
Oh, and take a look at: http://code.google.com/status/appengine
Click through the various items with green checkmarks to see the actual data that GAE considers "no significant issues." Including fun stuff like 80% datastore error rates.