Except ... it isn't correct.
There IS wasted hashing power.
The problem is not P2Pool specifically, but rather that people believe it is OK to get a high crappy reject rate (9%) because someone here said it was OK to be that high rate while they were getting a much lower rate.
If you use a good miner program and configure it correctly you will not get a high crappy 9% reject rate.
The cause is actually that the miners are not by default configured to handle the ridiculously high share rate (10 seconds)
So P2Pool is the cause, but the solution is simply to configure your miner to handle that issue.
Aside: if you have one or more BFL FPGA Singles, you cannot mine on P2Pool without wasting a large % of your hash rate.
Orphans aren't wasted hashing power for the p2pool "pool" which was what was being discussed. The node will broadcast any blocks it finds to all p2pool peers and all Bitcoin peers. Thus even a miner with 80% oprhan rate isn't wasting his hashing power from the point of view being disccused which is avg # of shares per block (or pool luck).
I think it is made pretty clear one's PERSONAL compensation depends on relative orphan rate.
Miner has 5% orphan rate, p2pool has 10% orphan rate. Miner is compensated 5% over "fair value".
Miner has a 10% oprhan rate, p2pool has a 10% orphan rate. Miner is compensated "fair value".
Miner has a 15% oprhan rate, p2pool has a 10% orphan rate. Miner is compensated 5% under "fair value".
Aside: if you have one or more BFL FPGA Singles, you cannot mine on P2Pool without wasting a large % of your hash rate.
Even there the hashing power isn't WASTED. Blocks will still be found at same rate regardless of orphan rate but the miner's compensate will be lower (due to miner having higher orphan rate relative to the pool).
Still theoretically I do think it is possible to make a "merged" sharechain. Bitcoin must have a single block at each height. This is an absolute requirement due to the fact that blocks are just compensation they include tx and there must be a single consensus on which tx is included in a block (or set of blocks).
With p2pool it may be possible to include "late shares" in the chain to reduce the orphan rate. Honestly not sure if it is worth it because as discussed if one's oprhan rate is ~= pools orphan rate the absolute values don't really matter.
Miner 0% orphan, pool 0% orphan is the same as Miner 10% orphan, pool 10% orphan.