Just tried it out and it worked without a hitch! Smooth video, no choppiness or pausing and a clear voice quality through the speaker.
The Apple rep on the other end seemed to be having a good time, but also seemed to not be using an iPhone 4 himself. What I mean to say is, he was sitting back in his chair and his video feed was stationary. So, unless he had an iPhone 4 mounted to his desk, which is possible, he might have been using an iChat type program on a computer in front of him.
Future inklings of iPhone Facetime to a laptop or desktop user?!