If I were Sun, I would probably be complaining about how nobody is going to buy Sun hardware anymore when they can just run their Java apps on GAE for pennies a day.

The incompatibility actually helps them -- if you want "real" Java, you are going to have to get a "real" server.

Finally, I don't blame Google for omitting core classes. Java's standard library is some of the worst code I've ever seen -- the interfaces are horrible (do they even know what OOP is?), and the implementation shipped with the open source JDK looks like it was hacked together by some high-school kids on crack. Google is smart to kill this shit off.