Looks like it either has problem with cgminer, or it has problem with getwork for solo mining. Blocks are being rejected due to wrong hash submitted via getwork. Balthazar, are you sure that getwork is properly supported? Have you tested with cgminer?
I think that it's result of 120s expire time, which is default value for cgminer and hard-coded value for reaper. I seen people which mined it at 4-8 mh/s... Of course, they got stales, but stales rate not so dramatic. There is no magic.
P.S. Tested it with reaper at diff 0.0004, got almost 100% of stales... Then I switched to cgminer with -E 1 and got "only" 55% stales at this difficulty.
P.P.S. Target is 6 blocks per hour (like PPC and Bitcoin), so situation will normalize in near future.
