I've been working on this for a while, so let me share some things:

First, for reference, I have 2 70s: A bear spec druid (my raiding main) and a BM hunter. I only use the druid for "carebearing".

Things that I have discovered:

1. Heals do not downrank. In particular druids are amazing as you can stack up a bunch of HOTs on a low level that can easily do more healing in a tick than his total hps. I literally follow my mage around while he gathers up groups of mobs to arcane explosion down and keep the HOTs on him. He is almost invincible with even cons and +2/+3s. It's also pretty neat to watch.
2. In low level instances a bear spec druid with ILOTP is the best you can get (heal yourself 4% on every crit no more often than every 6 seconds). I often get a low level, group with them, and then run through an instance (Stockades is the best), gather up everything that I can find, then just swipe away. The mobs do very little damage, which is easily healed by ILOTP. I just gather up 30 or so and swipe until they are all dead. The XP is pretty good.
3. Thorns is reflect damage and does not count as 'tagging'. In fact it doesn't count towards YOUR damage at all. As stated in the original post, you get the % damage you did of experience. What I've found is that things will die of thorns, but I get no XP, so I always leave it off (druids unfortunately have no GOOD AOE attack (I don't count cyclone, but might be good for a moonkin (probably not though because many mobs, particularly in Stockades will spell interrupt)).
4. There seems to be some kind of "average level" to determine how much XP you get. What I do is try to get random people to group with me. I bring them in and our characters get more XP (a little, but it's enough).
5. I have yet to find any super fast way to level an alt this way. It's faster than doing it alone, but not 2x. Generally I have a few alts, wait for them to get lots of blue bar, and then run them through an instance 2 or 3 times. It's pretty fast, but you don't learn your new character at all this way. I personally find it to be kind of relaxing to mindlessly run through an instance where I cannot possibly be hurt, but only so many times.