I realise that I am not very welcome here, but Lisa asked for my comments on bottled air so I'm happy to offer some. I have observed that the "bottled air" discussion is a very contentious issue so I don't want to throw more fuel on the fire. I'm also not an expert on compressed air, but have been around it most of my life with dad's profession.
For what it is worth, my opinion on the subject is that WRA2 can set their own rules how they like and if bottled air is prohibited in the competition then it is prohibited for the stated reasons.
Potential competitors, however, see the prohibition of bottled air as a deterent because for altitude records high pressures are required. To achieve higher pressures good quality high pressure equipment is necessary and is harder to obtain. This includes hand pumps, compressors or bottled air.
Bottled air as I understand it is prohibited within the competitions because:
1) It is dangerous.
2) It could give the rocket a kick like a stomp rocket.
3) The type of gas used in a tank cannot be verified and potentially give an unfair advantage to a competitor.
4) Being able to fill the rocket faster compared to competitors using hand pumps or compressors.
5) Too expensive and not widely available.
Bottled air IS dangerous. I believe the main concern here is that the tank could explode with very unpleasant consequences. Explosive accidents in reality are extremly rare. Consider the use of compressed gasses in everyday life: oxy welders, people breathing oxygen with lung problems, mountain climbers, paint ball games, Clowns at fairs blowing up helium balloons, firefighters entering burning buildings with breathing equipment, CO2 fire extenguishers in people's cars and homes and tens of thousands of scuba divers who strap one to their back every day.
Cylindres of their own do not spontaneously explode. They are designed to withstand a certain amount of punishment. Take SCUBA tanks for example that generally cop a lot of abuse on dive boats getting knocked around. They are also designed to not explode when hit by a bullet. (Look at the mythbusters episode). The main valves are designed to withstand a certain amount of impact when knocked over.
This is not an endorsement for mishandling tanks and they need to be treated with utmost care and common sense.
All tanks always need to be filled by professionals who check the "last tested" stamps on the tank before filling and only fill the tank with the appropriate gas.
The next issue are the things that connect to the cylinder. Pressure regulators, gauges and hoses. People could try to cut corners and build ones themselves, (we would recommend highly AGAINST this) as that can be extremely dangerous. Only commercial regulators and gauges should be used at all times and only those designed for the specific gas. Greasy fittings and pure oxygen are a dangerous combination for example.
This ,however, isn't a "bottled air" problem specifically, it is a problem no matter what the source of air. One needs to consider the workmanship of equipment of the entire path of air from the air supply to the rocket. Not only do you have to consider a pressure regulator, but gauge connections, non-return valves, hoses, launcher fittings etc. Because you are away from the launcher when it is pressurised does not mean you can use sub par materials or bad construction techniques in its construction. You may have a compressor or one of those high pressure hand pumps that is connected to a dodgy manifold or substandard hose. When you build up 500psi in it even with a hand pump you will still get a nasty surprise if it fails.
Water rocketry is inherently a dangerous sport as we have encountered a number of times ourselves, and as strongly advocated by USWR safety should be at the top of the list.
This issue may be easily resolved. A rule amendment can simply say that before launch the air line to the air supply has to be disconnected with a quick release fitting. This can be (somewhat) verified in the required ground footage of the launch. This prevents any advantage from a "kick" whether from a tank, a running compressor or a very eager rocketeer on a handpump during launch.
This is not an easy one to resolve. Perhaps competition judges can take the word of the competitor in good faith, and if indeed a record is broken then a record can be published with an annotation saying that "Gas could not be verified but atmospheric air is suspected". It is then left up to the reader to decide based upon the presented evidence.
As Tim mentioned there is a definite advantage that bottled air can fill a rocket faster than a hand pump and a compressor is somewhere between the two. Filling a rocket too quickly, can cause other problems as well. Perhaps then if the potential record holder who uses a hand pump manages to achieve the record in 2 hours and 10 minutes, then again their record could be published with a note saying "Although the flights occured just outside the 2 hour mark a hand pump was used." If the same rocketeer manages the two launches in under 2 hours with a hand pump, then they earn the bragging rights that they managed to make a record with only a hand pump and the rules stay as they are.
Cost and availability is a potential issue, but no where in the rules is the real total cost of a record attempt mentioned. A high tech carbon fiber rocket with complex tracking electronics, sophisticated launcher probably costs a bit more than the price difference between a hired nitrogen tank and an expensive compressor. Again this can be an issue for bragging rights. "So-and-So managed to beat a record for only X dollars.
Compressed air tanks vary greatly in availability and price from place to place, but so is the availability of other rocket and launcher building materials.
These are perhaps some things to consider in using bottled air. I am not advocating that the rules be changed as it would disadvantage existing competitors who have factored the existing rules into their design. Perhaps those are some things to be considered in future competitions. Rules are always totally up to the discretion of the competition organisers.
I am not trying to encourage the use of bottled air over hand pumps or compressors and we recommend hand pumps or small battery operated compressors for new rocketeers to the sport. We use scuba tanks for our rockets and tests mostly for the convenience, ease of use and cost of refils.
There, my rant is over now it can be picked to pieces.