Does anyone know how, if possible, I can replicate a Rackspace Cloud instance X to another instance, Y, for disaster recovery? So if cloud X goes down or has a problem the website will be served from instance Y.
If replication isn't possible or the best option what is? Such as using both machines in parallel and having requested routed to one or the other - and if X goes down, Y is used.
you can replicate your servers by many common tools such as glusterfs, dbrd etc however what you need to be able to server from instance y when instance x goes down is either IP failover or DNS failover
dns failover is totally possible if your dns provider supports it, however IP failover requires support from your DC/Hosting company, i do know that rackspace cloud supports this functionality but i think you have to have your servers in the same DC to allow it to work
the second part of your question is load balancing and by combining the above tools you can do this with something like HAproxy, varnish, pound, nginx etc
If you want to roll your own solution, you could try using rsync or scp along with another backup host. Then you'd have to figure out a way to do monitoring of your main instance and if that goes down, create another instance and restore your site to the new one. Then you'd have to switch your DNS records to point to the new instance.
If you want to spend the money to have 2 instances running at all times, you could look into clustering as mentioned by anthonysomerset.
If you're looking for a more reliable and managed solution, there is a hosting company called Standing Cloud that has auto-restore and backup working for multiple cloud providers. They also offer free test drives and automated installs for many web applications.
I answered this when you asked it on webmasters.stackexchange.com https://webmasters.stackexchange.com/questions/11670/replicate-rackspace-cloud-for-disaster-recovery
For the record, here's my answer: Load balancing will probably achieve what you want, even though the aim is to spread the load between two servers. This is available on Rackspace in beta http://www.rackspace.com/cloud/blog/2011/02/24/rackspace-cloud-load-balancers-beta-now-available-for-all-cloud-customers/
Although they give you instructions on how to do it yourself: http://www.rackspace.com/cloud/blog/2009/11/30/simple-load-balancing-on-cloud-servers/?replytocom=9628
