I swaddled Tyler in an Aussie swaddle using a bedsheet folded in half until he was 8 mo or so. I only stopped then because he was figuring out how to get his paci in by himself and I wanted him to be able to do it at night. At that point, I just wrapped his legs in a smaller blanket, and I still do for naptime to this day (he's almost 20 mo old). We never swaddled him at night, though...he just got too hot.
It's debatable whether or not there's any developmental "harm" in swaddling. Personally, I think that most of their developmental learning takes place when they're awake, but that's just my guess. Tyler did roll over late, crawl late, and walk late, but he talked early. I doubt it was related to swaddling, I think that's just the way he was. It all evens out in the end, IMHO!