Why did it not work? I don't know but what happened was that I downloaded the latest version of Eclipse, went to help -> install new software, added the repository
(http://dl.google.com/eclipse/plugin/3.7)
and started the installation. All was fine until it came to about 49% (in later cases I tried to install the core files and it stuck on 27%) and then it downloads the same file over and over again, from multiple mirror sites. Not only did this waste a lot of money, it never worked.
In the end I downloaded the latest Eclipse Java EE version and downloaded the google repository so that I could install GAE from my local machine. I also had to disable "Contact all update sites during install to find required software" before installation. This seemed to have done the trick and now I can start writing again. A massive sigh of relief.
Hopefully if anyone happen to have the same problem as I did they would stumble upon this post and not frustratingly bash their heads against the wall until they pass out.