With the Roo 1.1 M3 release we have changed the way we map the Spring DispatcherServlet following Spring Framework improvements. We are also using a new MVC resources handler (configured in webmvc-config.xml) which allows serving of static resources. Both of these changes allow us to remove the need for URL rewriting (which was present in previous versions of Roo) while still offering clean RESTful URLs.
As you have seen this causes some issues on GAE which we are currently following up with Google. The main issue for Roo scaffolded MVC applications is however the need for JSP 2.1 which GAE currently does not support (see https://jira.springframework.org/browse/ROO-1006 for details).