1) Is there any performance bottleneck for those non-default versions? eg, 
max instance can't exceed certain no?


Nope

2) How transactions are managed across different versions? eg, can I assume 
version 1 can't commit changes to certain entity group if version 2 has 
already started one on that entity group?


Yeah, since it's the same datastore, transactions would work the way you've 
described.

If you use appengine this way, you would have trouble managing all the 
different modules and deployments. Plus, there's a limit of around 10 (may 
be less not sure) versions that can exist at a time I guess.

IMO "version" should work according to how it is defined. You build a new 
feature, give it a new version, deploy it, if things work well, you switch 
to the new version, if the new version breaks under heavy usage, you roll 
back to the previous one.

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