Works fine with an iPhone 5, even with a case on!
Mine arrived in the mail this morning. Packaging was pretty good, nothing spectacular but mine arrived in perfect shape and they even included two AA batteries. Setup was easy, I was spoiled by having the "setup" instructions printed on top of the full side iCade's lid, but it's not a big hassle here, the instruction booklet is easy enough to follow.
I have tested this both with the iPhone 4 and iPhone 5, both fit in the iCade jr. just fine, even when using cases! I use
this case on my iPhone 4, and
this case on my iPhone 5. With the cases on they fit fine both vertically and horizontally (as you can see there's a little spot for it rest in the front).
Yes with the iPhone 5 you need to keep the top lid flap open. Which is fine! Because it can flip backwards and rest, meaning that it's not always half-open. You could possibly remove it if you take apart the iCade jr... but it's probably not worth it. The plastic sides, while they are thick, don't seem as sturdy as the full sized iCade (which was wood), so I wouldn't risk bending or breaking it just to attempt to remove the top.
I have no doubt it'll work with the iPhone 3G or iPhone 3GS, unless there is some sort of software requirement I'm missing. But I recall using the iCade (fullsize) on my original iPad with no issues. I'll test it with my iPhone 3G after I charge it.
Also, the iCade Jr. is also not too bad when you're holding it in your hands. It can get tiring after a while, but it's doable. The joystick unscrews so you can use the D-pad below it. Not bad at all for $15 shipped, I'm every happy with my purchase.
Pictured below is my iPhone 5 (in the case linked above) with the iCade Jr.