There are 3 known methods to install demos in 2.35 to 2.41: Post #4
, Post #90
and Post #8
. The #8 and #90 are almost the same, but #90 has less steps.
I see here many reports that demos don't install in 2.42. I cannot confirm if they work in 2.42, because I'm still in 2.41.
There are some demos that require activation (like Def Jam, Echochrome, Lair, EA SPORTS Fantasy Football Live Draft Tracker, Mainichi Issho, MX vs ATV, NHL 08, The Darkness, Resistance 2 Private Beta, Home Beta and FULL games). These ones only install using the method of post #4 (that mean, that you should have purchased or downloaded the game from the PSN store and have the real link in your Download List).
For the ones willing to try the Proxy in 2.42, I'd suggest that try demos that do not require activation and use the method of post #4. If it does not work, report what demo and how it was installed.