Google Reader's new "send to" feature now has built-in support for Instapaper. When the "send to" feature launched a few days ago, native Instapaper support wasn't there, but it was possible to add the service via the "create a custom link" button.
While these solutions are better than nothing (just barely), neither of them is optimal. The native solution pops up a new window, and you have to click on the "add" button to actually add the link (that said, it is nice that the window auto-closes after you hit "add"). The "custom link" solution is as annoying as it too pops up a useless window that does not auto-close.
Luckily however, the Instapaper bookmarklet has been updated to support Google Reader, and this approach works wonderfully. Indeed, it works exactly the same as it does for any other link (i.e., a status "window" displays inline with the web page as the link is being saved, and then disappears once the link has been saved successfully).
In light of the new Google Reader functionality, I now keep two Instapaper bookmarklets in my bookmarks bar: this new one to save links from within Google Reader, and my modified version to save pages that are loaded in their own tabs/windows (the modification automatically closes the tab/window when the bookmarklet is activated).