How does AppEngine(or its embedded-server) processes different urls - google-app-engine

Question

I created a simple appengine project that accesses a restful webservice hosted in http://commerce.qa.mycomp.com (mycomp should be replaced with my actual company name).
I am using the Jersey Client to make the client request. I do a POST request to the above url.
When I run the application locally, it always returns 404 Not Found response. For experimenting, I did a POST request to http://www.bbc.co.uk/news/ and this works fine, and returns 200 as the status.
I just decoupled my app from appengine and ran it in the separately-configured tomcat server, and there it works fine and returns 200 status code. I think appengine uses Jetty as the server. Does Jetty have any bugs processing urls like commerce.qa.mycomp.com. Why I am asking this is urls that start with www.any.com seems to be working fine.
The two code snippets shown below is not working when run within appengine locally(not running even if I host it to appspot).
Client client = Client.create();
WebResource service = client.resource("http://commerce.qa.mycomp.com/rest");
ClientResponse response = service
.header("Content-Type", "text/xml; Charset=utf-8")
.header("Authorization", "Basic dwt3hkl553lsfsfssf3")
.post(ClientResponse.class, "does not need to be actual xml");
URL url = new URL("http://commerce.qa.mycomp.com/rest");
HttpURLConnection conn = (HttpURLConnection)url.openConnection();
conn.setDoOutput(true);
conn.setRequestMethod("POST");
conn.setRequestProperty("Content-Type", "text/xml; Charset=utf-8");
conn.addRequestProperty("Authorization", "Basic dwt3hkl553lsfsfssf3");
OutputStream os = conn.getOutputStream();
os.write("no need to be actual xml".getBytes());
os.flush();
System.out.println("Response Code: " + conn.getResponseCode());
But when run with tomcat, it just works.
My installations are:
Google App Engine Java SDK 1.6.1
Google Plugin for Eclipse 3.7
jersey-client-1.12, jersey-core-1.12, jersey-json-1.8
Please share thoughts.