I haven't gone through all of the thread. But I'm using routes with GAE. I'm using latest version of web2py.
My routes is
routes_in = (
(r'.*:/favicon.ico', r'/init/static/favicon.ico'),
(r'.*:/robots.txt', r'/init/static/robots.txt'),
)
It's working without any problem at all. I've used it before (with version
1.6 or 1.7)

