AppEngine is about scalability, not performance. You shouldn't care if a single hit on an AppEngine app takes 2 or 4 times as long as a single hit on your dedicated sever; the point is that when there are zillions of hits, your server will be on fire while AppEngine will be taking about as long as it did for that first hit.
Of course, this scalability is not without cost. Most web apps don't need this kind of scalability, so the development tradeoffs (like the chance of datastore operations failing, or the inability to wrap transactions around arbitrary sets of data operations) may be too much trouble.
AppEngine isn't for all web apps, and many web apps would be very painful to shoehorn onto AppEngine. Still, if you want to build your app so it scales like Google's own apps scale, AppEngine can help get you there.
There seem to be a few cases where it's far more than 2 or 4 times as long. I've found deleting takes ages - a couple hundred items can take a minute of "CPU" time. Discussions on the forum mirror that.
I think it's great for many individual users doing tiny operations that don't interact with others, which my use case is. But you will be surprised by some of the performance characteristics.
Of course, this scalability is not without cost. Most web apps don't need this kind of scalability, so the development tradeoffs (like the chance of datastore operations failing, or the inability to wrap transactions around arbitrary sets of data operations) may be too much trouble.
AppEngine isn't for all web apps, and many web apps would be very painful to shoehorn onto AppEngine. Still, if you want to build your app so it scales like Google's own apps scale, AppEngine can help get you there.