This probably won't help. Google projects are typically built to run on their very specific infrastructure. It's unlikely that an open sourced version would be viable outside of Google. It's always possible though.

Maybe they could release a version that would run on AppEngine and customers could just pay for their own or something.

If the product was open sourced I would gladly pay a subscription to use it on Google's infrastructure, so I think your AppEngine idea is a good one.

Google can't open source Google Reader even if it wanted to because, to make connections and recommendations it used Google's Crawler which is part of the rest of Google's infastructure - something which Google definitely won't open source. As well as using Google's Crawler, the Google Reader team created separate recommendations to improve Google Reader and those people don't come cheap either - and giving up that knowledge is valuable to Google's competitors.

So.. give the subscribe/favorite/star portions and take out the recommendations.. most people rarely use that functionality.