In general yes, it's a myth that grants are only for full-time academics. However this particular grant is indeed only for full-time academics, according to its terms: http://research.google.com/university/relations/littlebox.ht... Though the full RfP does also encourage groups of students to recruit a professor and apply as a team.
Incidentally, the RfP has a nice summary of what Google thinks the main engineering challenges in winning the award are. The first one on the list is finding a way to deal with 120 Hz ripple in a way other than the current solution of huge capacitors.
