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Looks like the biggest change is the addition of Django 1.2 (previously it was only 0.96). What are the key features that Django 1.2 offers?

Still waiting for SSL for custom domains, that's by far the biggest gap in GAE's feature set.

New admin interface, and lots of API changes (unicode, forms, etc.).
I believe the admin interface doesn't work on AppEngine though :(
They've had support for Django 1.0 and 1.1 for some time now.
SSL is definitely a huge concern for us. We're not sure we want to launch our product without it, but we certainly don't want to leave App Engine.
Is anyone using the XMPP API for anything?