what is the recommended way of running a embedded web server within a desktop app (say wsgi server with pyqt)
Use something like CherryPy or paste.httpserver.  You can use wsgiref's server, and it generally works okay locally, but if you are doing Ajax the single-threaded nature of wsgiref can cause some odd results, or if you ever do a subrequest you'll get a race condition.  But for most cases it'll be fine.  It might be useful to you not to have an embedded threaded server (both CherryPy and paste.httpserver are threaded), in which case wsgiref would be helpful (all requests will run from the same thread).  
Note that if you use CherryPy or paste.httpserver all requests will automatically happen in subthreads (those packages do the thread spawning for you), and you probably will not be able to directly touch the GUI code from your web code (since GUI code usually doesn't like to be handled by threads).  For any of them the server code blocks, so you need to spawn a thread to start the server in.  Twisted can run in your normal GUI event loop, but unless that's important it adds a lot of complexity.
Do not use BaseHTTPServer or SimpleHTTPServer, they are silly and complicated and in all cases where you might use then you should use wsgiref instead.  Every single case, as wsgiref is has a sane API (WSGI) while these servers have silly APIs.
The desktop app should start the web server on launch and should shut it down on close. 
Assuming that the desktop is the only client allowed to connect to the web server, what is the best way to write this?
Both the web server and the desktop run in a blocking loop of their own. So, should I be using threads or multiprocessing?