Google released version 1.0.2 of the Google App Engine SDK two days ago. If you're using Google App Engine, you should definitely upgrade.
The Google App Engine SDK 1.0.2 article by Aral Balkan, unless otherwise expressly stated, is licensed under a Creative Commons Attribution-Noncommercial 2.0 UK: England License.
You can find a list of fixed issues in the release notes, including the template cache issue that I was running into.
Also, it's not in the release notes but I just confirmed that the app.yaml skip_files issue has also been fixed. So you don't need the patch any longer.
I also tested the latest version of The GAE SWF Project and it works out-of-the-box with version 1.0.2.
The Google App Engine SDK 1.0.2 article by Aral Balkan, unless otherwise expressly stated, is licensed under a Creative Commons Attribution-Noncommercial 2.0 UK: England License.

Hi Aral
Your work is impressive
We’ve found that appcfg.py update rejects two of the files in your source code as “too long”
Here’s the error message when trying to upload files to App Engine using appcfg.py update:
Scanning files on local disk.
2008-05-23 08:49:21,874 ERROR appcfg.py:1089 Ignoring file ‘psd/404kitten.psd’:
Too long (max 1048576 bytes, file is 1450526 bytes)
2008-05-23 08:49:23,246 ERROR appcfg.py:1089 Ignoring file ‘flash/initial.fla’:
Too long (max 1048576 bytes, file is 1312768 bytes)
Initiating update.