Huh, this is bullshit.
My gf updated to iOS 5, but she doesn't have a data plan. Her iPhone is pretty much wi-fi only.
We messed around with iMessage on wi-fi and it was cool, however then we tried to disable wi-fi on her device to find out how things get along when she leaves a wi-fi area. I sent her a message, it was sent as an iMessage... of course it didn't get delivered, but the thing is that 5/10 minutes passed by and it didn't gave any warning, much less tried to be sent as an SMS. So basically I couldn't text her anymore.
Then I just disabled iMessage on her phone and tried to send a message from hers to mine and it worked (duh). I just figured out much later than even with iMessage disabled on her end, when I tried again to text her, again it tried to send an iMessage and again it get stuck. Just a blue text balloon with no receipts at all.
I just had to disable iMessage altogether on my phone too, which sucks. I already had my dad and a couple of friends using it with me. Now that I think about it, my father will have a hard time texting me unless he disables iMessage too. Fuck.
The system is not nearly as flexible as I thought it out to be.