NotImplementedError: Unable to find the Python PIL library. 1)
There problem is that you have not installed PIL into Python25/Lib/site-packages/
Download it here
If error still comes up, make sure to explicitly tell the development server (Google App Engine Launcher) which Python distribution you are using as you may have multiple installations of Python (2.5, 2.7 etc..) and it registered by default with a different distribution.
Go into Edit -> Preferences
In “Python Path”, specify path to Python exe : C:\Python25\pythonw.exe