Python and Java are kinda one in the same, what you can do with one, you can do with the other.
The difference is Python is fully interpreted. Meaning, you write code save in .py or .pyw and the interpreter compiles and runs the code when invoked. Compile and running are done then and there all at once.
Java is kinda like compiled mixed with interpreted. Java uses a virtual machine that takes the source, compiles, then runs via the virtual machine. There are a few things that can happen, as with Android, Dalvak is used to run code.
Python is to PHP as Java is to C# (for the most part).
Python was built mainly for web stuff, but has excelled in other areas such as local app dev, and has support for a lot of GUI tool-kits suck as Tk and Qt.
Java has it's pluses too. It is Androids preferred way to dev for their devices, also with applets, dumb-phone support, and others. It is also a good language to know. Most colleges and university's offer Java over Python.
Syntax is also a big player. Python is very loosely typed, meaning you can do something like "x = "this string" without declaring x first, it just knows x is a string. Java isn't as loosely typed, meaning you have to define x before assigning anything to it. Java uses {} for code blocks and doesn't care about indention. Python uses indention for its code blocks and forces people to write cleaner code. Python is much easier to learn than Java too from syntax alone.
As for projects, this is a big topic for new people since they don't know where to go after the tutorials. The thing with this is, pick something that interest you the most. I know the first real thing I done with python was tracking infrared light with my webcam because I thought it was cool. Something that will help you further your knowledge is writing a game. A simple 2D game will work and will expose you more to OOP and using API's and all. PyGame is very popular, so try writing a platforming game or tile-based game. Art-work isn't the focus either, you don't need to animate the characters or anything.
Another good project would be to write a text editor like Notepad, but with auto-complete and code highlighting, you could use the built-in Tkinter lib too. Stackoverflow has some good suggestions as well. Just google for "Python Projects".
Here is one thread on Daniweb just for projects:
http://www.daniweb.com/software-development/python/threads/32007/projects-for-the-beginner
