If you use the app-engine plug-in deploy command using AppEngine SDK version 1.2.8 it will fail with the following error:
[java] Bad argument: email requires an argument, for example, "email=FOO" [java] usage: AppCfg [options]
Google changed so deployment is targeting a directory instead of a war file.
What you need to do to deploy is instead to use the AppEngine built in command to deploy
%APPENGINE_HOME%/bin/appcfg.cmd update c:\users\morten.grails\1.2.0.RC1\projects\
After this all I had to do was to update my deployment scripts, and the stage is set for some serious Grailsing.
I should point out that all previous workarounds for working on Windows still need to be in place.