Ad-hoc distribution is definitely the way to go to make it easy for beta testers to install an iOS app that is not yet available through Apple's App Store. The answer to this stackoverflow question thoroughly explains how it works.
Today I tried to create a new ad-hoc distribution for my Little Go app, the first after iOS 5 has been released. Very much unexpectedly, the whole process fell flat on its nose due to a combination of code signature and entitlement problems. After a 4 hour battle I now have things working again, and although I am not entirely sure about the exact source of the problem, I thought I would like to write down what I have learned this afternoon.
The final solution, anyway, for those who don't want to read the whole story: Invalidate and then regenerate all provisioning profiles on Apple's iOS Provisioning Portal.