Most people who develop for Google App Engine for Java use Google's Eclipse plugin. It makes it trivial to create a new App Engine project and dist it to the live servers.
The plugin is fine, but Eclipse is a whole different subject. I've been using IntelliJ IDEA since January and have definitely been spoiled by it. After IDEA, going back to Eclipse feels like taking a step backwards about 5 years. Plus, the JSP editor would crash on me after 10 or 15 edits, and the only way to fix it would be to close the file and reopen it. Seriously I couldn't fix that after many attempts at customizing my settings, it was just horrendous.
Then a few weeks ago I found out that IntelliJ had released a plugin just for Google App Engine development. I converted my project today and could not be happier. Changes to web pages (JSP, tag files, Javascript, CSS) require about a 5 second build before they are ready in the browser again. The only downside is that the overall app startup seems a lot slower (about 30-60 seconds on my ancient XP laptop), which is sad because you'll need to do that any time you change your Java classes.
I haven't tried using their release tool yet but even if I have to release by hand, it will be worth it to be using IDEA again.