I've installed the Google Plugin for Eclipse 3.4 and it seems to work fine.
But when I start a new Web Application Project, it wants me to configure the Google App Engine SDK. I click on Add App Engine SDK, but it doesn't recognize my (valid) GAE SDK. It comes back with "Failed to initialize App Engine SDK at %path", no matter what path I give it.
Does your SDK run if you start dev_appserver from the command line? I had a similar problem once and it was because the script wanted to ask me about automatically checking for updates - once I'd answered the question and exited the appserver I was then able to add it to Eclipse.
Have you checked your "path" environment variable to include
;C:\Program Files\Google\google_appengine\
Are you trying to use the Java or Python SDKs, and are you sure you downloaded the right one?
If Python, remember that the Google Eclipse plugin is currently Java-only.
I am experiencing the same issue. I have checked my environment variable also and a path to the SDK directory is present (C:\Program Files\Google\google_appengine).
I had this issue. I downloaded the java zip package and extracted it manually but it turned out that the zip file was either corrupted or messed up during the extraction. Regardless, downloading the package again and re-extracting it fixed the problem for me.