One thing GAE does do, in my opinion, is put the final nail in the coffin for shared hosting. Who would pay even a few dollars a month for low quality, limited shared hosting when they can get their app on Google's infrastructure for free? The only group I can think of is those who only serve static content.
I disagree. Many people are using shared hosting to run apps such as WordPress or Drupal that don't run on GAE. It's more likely that $10/month VPSes will be the death of shared hosting.
With a VPS you have to manage an entire operating system. With shared hosting you usually don't have to manage even a single application (since they usually have "one-click" installers and auto-updaters). For that reason, the vast majority of people would be better off paying $10/month for shared hosting than $10/month for a VPS.
Indeed, I did just that. I moved all my wordpress installations over to a $10 account with webfaction. I considered a VPS, but dropped that idea quickly. I wasn't interested in being a sysadmin, and I didn't have to worry about shoehorning the DB server, OS and web/application server into the space afforded by a cheap VPS.
On a VPS you should be able to install some kind of control panel that would give all the advantages of shared hosting but the flexibility (if you need it) and performance isolation of a VPS.
