Is it possible to fetch a google profile nickname and use in app engine apps?
No - the User API only provides the user's email address, an app-specific unique ID, and their nickname (Which, as you observe, is derived from the email address).
Currently the method nickname() in the Users class seem to return either the initial way you entered your username when you signed up for gmail (IE. "UseRnAme" if thats how you chose to type it, rather then "username" as it would show up when you log in on a google service) or the entire email if you signed up for a google account with another email provider.
Google profiles have a field called Nickname though, is it possible to use that inside an app engine app in any way?