Yeah, lava flows too slow for that to work. Here's the basic concept:
Liquids can be split into about 4 parts, so there are four different levels per block. You need about 2 parts (so half a block) to be able to pick up the liquid. The manual bucket method (which I think still works. It was working for water yesterday, haven't tried with lava), where you align your blocks like:
O
X X
XXXXX
and place the water at the O causes the liquid to split into two parts on each side. Since you can pick up two parts with a bucket, and the bucket registers as a full block, you can do this repeatedly over and over for infinite liquid. Here you're exploiting the functionality of the bucket, not the liquid.
With the infinite waterfall, you're exploiting the flat water. If flat water can, it'll flow out to a lower level. Basically, after dumping 3 buckets of water on top, you have 12 parts of water with roughly 6 parts of liquid on either side of the top of the waterfall (though realistically, its probably about 5 on the left, and 7 on the right). Each side will dump 2 parts of water onto the block below, and two parts on the block above it, then will stop flowing since the water in the hole is saturated (even more so by the fact that the water hitting the block below takes a split second to split to either side), and so the water on top stops flowing. There seems to be a bug where the flat water will not actually "drain" per se, unless it is completely empty. Since it will attempt to drain into the saturated hole, it will sort of back flow and fill up the top again. This is accentuated by the fact that water calculations seem to slow down with the more water that is moving (and since the water keeps duplicating, we're facilitating that.)
Unfortunately, if the water calculations speed up, it'll drain out the flat water on top and stop the infinite water. This is completely random though, I, nor anyone else, have seemed to find a way to cause or not cause this.
As far as lava goes, with the reduced flow speed of lava you can exploit a bug (well, you could in 1.0.4, haven't tried this in 1.0.5) where you would "catch" the lava as soon as it hits the ground and delivers around 2 of its 4 parts. Basically, you set it up like
XO
XXXXX
and continuously, as fast as you can, pick up and drop the lava at the O. This seemed to work a bit better for me, but you'll have to quit and rejoin (or /settle on a server) every so often, because the lava will
stop completely after about a minute or so. I think it has something to do with a bug where lava can exist "inside" a block, which will kill enemies that stand on that block, but will do nothing to the player. Settling or rejoining in single player will make these areas spawn a bit of flat lava on top of them.
The original water dup seemed to work with lava too, it's just alot slower, and can overflow easily, which can kill you quickly if you aren't prepared.
Also, fun fact, if you can get a contained area of lava about 20 blocks wide by 8-10 blocks high, you can knock out one bottom brick, and the lava will flow infinitely which still seems to work for 1.0.5 (though I didn't leave it on for very long, we already flooded half of our large world). Basically, same concept here, except the lava / water above, to the left, and to the right of the "draining" block will each give a part to the now-empty block, which creates another liquid block, but leave the others intact. For water, you need the container to be about 16-20 blocks high (about twice as high as the lava, since it flows much faster). Note that leaving a single player map or settling in a multi player map with this method when the liquid is flowing will drain the entire thing and you'll have to re-make it. I'll see if I can post some screen shots of ours whenever I get home from work.
None.