Chugging right along and hit a speed bump, figured it out and got it working. Coming from the CodeIgniter File Uploading Class, the Google AppEngine (GAE) approach is totally different. You pretty much have to throw away what you know & use there. Direct file uploads to your handler will not work. You have to use the GAE API to create a dynamic upload URL to put as your form's action. You miss out on CI's ability to limit file types and image dimensions (you can limit file sizes), but GAE adds cloud storage and the ability to receive very large files (up to 100 TB). GAE passes back the $_FILES super global to a handler you specify when you create the URL.
So the first step is to add the API inclusion in your CI controller. Then in your handler that creates the upload form, you call createUploadUrl and pass that into your template for the form action parameter. Then you create another handler (which name you used in the aforementioned createUploadUrl method) and you can verify the upload from the $_FILES parameter and then do whatever you need.
Here's what my controller ended up looking like:
The Google documentation on the topic was a really good reference. Note that the user has 10 minutes until that dynamic URL expires.