Does it still have scalability issues ? Is a good choice for the development of a service with thousands of users ?
I'm not a developer but I've just made a quick search to try answering your question.
The following is a good review for GAE: Google app engine review (Java edition)
This is the official developer blog for GAE: Google App Engine Blog (News, notes, tips, and tricks from the Google App Engine Team)
Hope that helps.