Got it! The answer was in the Restlet 2.1 docs in the Android client part code:
http://wiki.restlet.org/docs_2.1/13-restlet/21-restlet/318-restlet/303-restlet.html
The workaround applies to JSE too. Here is the one-line "workaround":
// Workaround for GAE servers to prevent chunk encoding
cr.setRequestEntityBuffering(true);
Magically it started working...
Thanks for the help.
Dennis
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