But ... Rayfish creates a layer 3 network too. It assigns IP addresses to each node. I don't really see why it matters from this point of view whether it uses Iroh or something else to provide its backhaul. That's like saying Wireguard works at layer 4 because it uses UDP. The whole point of VPNs is to offer some kind of tunneling over higher level protocols.
Computers are pretty fast these days. It depends on exactly what kind of general purpose use you're talking about. Trying to push 10 Gbps through a slow old machine? You're doomed. Trying to run SSH, browse the web, or even watch Netflix over a tunnel? Probably fine to send the packet up and down the stack an extra time or two.