Theoretically. Right now, unless I'm reading things wrong, the limits imposed by the agreement are less than quite a small shared hosting account, and pretty much any dedicated or VPS account, could serve each month. Is n scalability really infinite, or even interesting, if it's less than a single box could serve using standard tools?

I'm sure it'll expand in time, and maybe even in time to keep up with any app you build on it that happens to be explosively successful. I'm just saying that it's silly to imply that App Engine scales if you can't actually run bigger applications on it than a single traditional host.