In JIRA 5.0.x a function was added for JIRA to easily create a Confluence page link, as seen here:
http://confluence.atlassian.com/display/JIRA/Linking+Issues#LinkingIssues-CreatingalinktoaConfluencepage

The problem is that this does not work with earlier versions of Confluence (pre Confluence 4.x).

Steps to reproduce:

• Setup a fresh instance of JIRA 5.x and Confluence 3.5.x
• Setup application links between the 2 instances
  • remember to enable remote API
• Create a JIRA issue
• Select More Actions > Link > Confluence Page
• Notice that JIRA does not recognize the Confluence pages
• No errors are shown in logs
• See screenshots below

I also ran the same test with Confluence 4.2 and was able to link to Confluence pages with no problems.