Python 2.7.2 and Google App Engine SDK 1.6.1 on Win 7 Home Premium not working
Do you see anything in the GAE SDK logs? 
Which browser are you using? What is your default browser? 
The default security settings in IE require you to enable intranet access.
I recently had to rebuild my Win7 dev box. Chrome was my default browser. When I installed GAE SDK v1.6.1 I had a similar problem to what you describe.
I checked logs and fiddled with the browser configuration to resolve it.
My recollection was that once I made IE 9 my default browser again, i saw the intranet security error. After enabling access to intranet sites like localhost:8080, things started working OK, but start-up was sometimes slow. Then I made Chrome my default browser again and the start-up became a bit faster and more reliable.
I have installed Python 2.7.2 (Win7 32-bit) and Google App Engine SDK 1.6.1 for Win7 on a 64-bit system running Win7 Home Premium.  Default folder locations for both Python and GAE.  When I try to run the helloworld project as described in the Google Python Getting Started doc, the Launcher's "browse" button never becomes active.  The GAE SDK is supposed to do fine with Python 2.7.
Is there a complete listing anywhere of environment variables needed for this setup to work?  So far, all posts I have seen are from users who have gotten well past this absolutely basic step.