In practice I've rarely seen a problem with Python performance, but that usually comes from careful use of the libraries which are often implemented in C. The one time I did have performance problems with Python was implementing A* search, where the standard data structures aren't quite as efficient as the C++ equivalents. Totally agreed on the GIL issue although with MMOs I have always favoured a multi-process/distributed approach with single-threaded simulation in each simulation server, so it's not been an issue for me.
Angus, if you want to know about UDK I suggest posting a new thread about that with a specific title to match. Most people still reading this thread won't know anything about UDK and anybody who does know UDK won't know it's relevant when they scan the first post. Make sure you have read all of the Unreal Networking page and see what questions you still have.