To follow up, I tried this again and had some success:

1. Created 'myApp' test directory using ssh session, in 'webapps/
web2py/web2py/applications/'
Note that it appears on the 'Installed Applications' page in the admin
web interface, but clicking the 'edit' button reveals an empty app.
2. Using web2py running locally on my laptop, I successfully packaged
the welcome application using the admin web interface. Saved package
file locally.
3. Then in admin interface for web2py on webfaction, I used 'Upload &
install packed application' as directed by annet:
  > Application name: myApp
  > Upload a package: [used Browse to select the package saved in step
2]
  > overwrite installed app: selected
  Clicked Install and the packaged myApp app was installed.

Now clicking edit for the myApp application shows that it is a
complete app copied from the welcome app.

So thank you Annet. I do not understand the reason for the problem,
but at least there is a workaround.

Dave

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