This is the error I recieve. When I revert to using 6u30, it works fine. AppEngine must be updated now to fix this bug.
Initializing App Engine server [ER
This bug seems to be fixed with GAE 1.6.4
java version "1.6.0_31" Java(TM) SE Runtime Environment (build 1.6.0_31-b04-415-11M3635) Java HotSpot(TM) 64-Bit Server VM (build 20.6-b01-415, mixed mode)