IOS – AirPlay video with audio on iOS device

Yes, this would be known.

First, the old Apple TV won't be getting the update (since its now iOS based), and therefore wont support airplay.

Not sure of any workarounds for an old Apple TV that use the actual AirPlay standard. A hack may exist after 4.2 has been out for a while, but I think most people decided to just move to the new Apple TV instead.

Didn't intend to answer my own question, but I found this March 2011 Bloomberg article:

Apple Inc. (AAPL) is weighing an expansion of its AirPlay audio service to include streaming video from an iPhone or iPad to television sets, according to two people familiar with the project.

Under the plan, Apple would license its AirPlay software to consumer-electronics makers that could use it in devices for streaming movies, TV shows and other video content, said the people, who asked to remain anonymous because the plans haven’t been made public. Apple now only licenses AirPlay for streaming audio. Devices that could be used for video may be available this year, one of the people said.

So apparently the answer is "not yet, but maybe in the future."