I have been using Reflection with Screen Sharing often to demo iPad software remotely to my user base. It's pretty good software and relatively cheap. It's not perfect though, sometimes things get weird, especially when the iDevice you're using switches screen orientation. I've found it's best to lock the screen to prevent this.
The shared screen is of a slightly lower quality and there is some delay, but for most things it completely workable.
What's the reason this isn't compatible with the iPhone 4/other devices?
Also, trying to open the preferences (10.6.8) takes 20-30 seconds of beach ball frozen before the window comes up (and 5-10 to close as well, without changing anything)
Because only the iPhone 4S and iPad 2+ support AirPlay Mirroring.
There are ways to do it with apps for jailbroken iOS devices, though you're likely to get a lesser quality. You might want to have a look at this one for example, made by a former colleague: http://www.plutinosoft.com/idemo
That was my first inclination as well, but I'm not sure that it's any better for getting the job done than the solution described here. This way seems a bit easier, if you don't care about sending input back to the phone. Also, Veency/VNC can have some visible tearing/lag that I doubt the Airplay mirroring experience has.
Reflection has recording built in. It was pretty laggy for me, but my MacBook was on wifi and maybe bogged down with other stuff running and the app I was running pushed a lot of pixels. (That's a whole lot of 'but' there. I need to try it again.)
No question. I'd say the biggest issue there would be artifacts and frame rate. But jailbreaking is really the only other option, so I think it's not a bad plan.
Yes. There's shairport and many XBMC builds include servers to receive AirPlay audio and even video, but not AirPlay mirroring. (There are really three levels of AirPlay - audio, streaming video, and mirroring - essentially the whole device's display.)
There are even Android servers like AirBubble and Android HIFI that can receive audio but not video and clients like HoneyPlayer (audio) and iMediashare (audio and video).