Geohashing is a reasonable solution for some spatial problem domains; it's one solution along the spectrum of "precalculate a lot up front and make queries cheap" vs "write in a cheap & easy format but make queries more expensive". Pre-calculation strategies are usually more scalable when you have large query loads, but they suck bigtime if you need to fully recalculate a large body of data (as the original blog author is doing).
Maybe the blogger would be better off using PostGIS; but then, scaling and synchronizing a large cluster of PostGIS systems is nontrivial. The issues here are too application-specific to draw any positive or negative conclusions about appengine.
