Google App engine template unicode decoding problem
Are you using Django 0.96 or Django 1.0? You can check by looking at your main.py and seeing if it contains the following: 

from google.appengine.dist import use_library
use_library('django', '1.0')
If you're using Django 1.0, both FILE_CHARSET and DEFAULT_CHARSET should default to 'utf-8'. If your template is saved under a different encoding, just set FILE_CHARSET to whatever that is.
If you're using Django 0.96, you might want to try directly reading the template from the disk and then manually handling the encoding.
e.g., replace 
template.render( templatepath , template_values) 
with 
Template(unicode(template_fh.read(), 'utf-8')).render(template_values)
When trying to render a Django template file in Google App Engine

from google.appengine.ext.webapp import template
templatepath = os.path.join(os.path.dirname(file), 'template.html')
self.response.out.write (template.render( templatepath , template_values))

I come across the  following error:

<type
'exceptions.UnicodeDecodeError'>:
'ascii' codec can't decode byte 0xe2
in position 17692: ordinal not in
range(128)
args = ('ascii', '<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0
Str...07/a-beautiful-method-to-find-peace-of-mind/
--> ', 17692, 17693, 'ordinal not in range(128)')
encoding = 'ascii'
end = 17693
message = ''
object = '<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0
Str...07/a-beautiful-method-to-find-peace-of-mind/
-->
reason = 'ordinal not in range(128)'
start = 17692

It seems that the underlying django template engine has assumed the "ascii" encoding, which should have been "utf-8".
Anyone who knows what might have caused the trouble and how to solve it?
Thanks.