Wil Shipley blogged a couple years ago here:
about developing his Delicious Library app on his Air. The post itself is a bit much, but there's an addendum at the bottom with some compile stats. Namely, the Air (because he got an SSD) compiled Delicious Library faster than his Macbook Pro.
But I would love to hear others' experience developing on an Air, since that's what I'm considering now, too. This Stack Overflow post:
mentions that Xcode can't autocomplete well on an old air, but I think it might be because it has a balls-slow 4200 rpm hard drive.
The only thing that concerns me is the processor. What things tax the CPU?
A few things tax the machine:
1. Streaming video, especially flash, and especially when you multitask it.
2. HDMI out. I like to plug my Air into an HDTV and stream video using VLC. Sometimes this will overheat and start skipping.
3. There is lowered responsiveness when the Air is doing a backup to Time Capsule.
4. The Ethernet is not as fast as a normal PC, which can be kind of obnoxious sometimes.
5. If I put it on the bed covers for too long it overheats and slows down. Likewise for couches and occasionally my lap.
All in all I'm happy with this setup, and I use many big apps concurrently: Photoshop, Word, Mathematica, Eclipse, lots of PDFs, iTunes, Safari, VLC, SABnzbd+, as well as many other less taxing apps like Aquamacs, EverNote, Mail.. all concurrently.
The Air has never had a problem for me running standard apps. The issues always crop up when I'm trying to watch video (esp flash) or doing large amounts of i/o either through WiFi or ethernet.
My guess is that it's not going to be any fun if you want to run an IDE. But regular text editors shouldn't cause a problem.