When using "use instance credentials" I get the following exception:
===========================
Starting lambda deployment procedure
Copying zip file
File Name: awslambda-942813613263363530.zip
Absolute Path: /tmp/awslambda-942813613263363530.zip
File Size: 10388
Lambda function existence check:

{FunctionName: alex_test,}

Lambda function does not exist
Lambda create function request:
{FunctionName: alex_test,Runtime: python2.7,Role: arn:aws:iam::763429161784:role/lambda_hipchat_pr_digest,Handler: lambda_handler,Code:

{ZipFile: java.nio.HeapByteBuffer[pos=0 lim=10388 cap=10388],}

,Description: Hipchat PR Digest,Timeout: 60,MemorySize: 256,Publish: true}

com.amazonaws.AmazonServiceException: Cross-account pass role is not allowed. (Service: AWSLambda; Status Code: 403; Error Code: null; Request ID: bb814e04-bb96-11e5-88fa-b56203d5b166)
at com.amazonaws.http.AmazonHttpClient.handleErrorResponse(AmazonHttpClient.java:1239)
at com.amazonaws.http.AmazonHttpClient.executeOneRequest(AmazonHttpClient.java:823)
at com.amazonaws.http.AmazonHttpClient.executeHelper(AmazonHttpClient.java:506)
at com.amazonaws.http.AmazonHttpClient.execute(AmazonHttpClient.java:318)
at com.amazonaws.services.lambda.AWSLambdaClient.invoke(AWSLambdaClient.java:1925)
at com.amazonaws.services.lambda.AWSLambdaClient.createFunction(AWSLambdaClient.java:686)
at com.xti.jenkins.plugin.awslambda.service.LambdaDeployService.createLambdaFunction(LambdaDeployService.java:162)
at com.xti.jenkins.plugin.awslambda.service.LambdaDeployService.deployLambda(LambdaDeployService.java:82)
at com.xti.jenkins.plugin.awslambda.upload.LambdaUploader.upload(LambdaUploader.java:51)
at com.xti.jenkins.plugin.awslambda.upload.LambdaUploadBuildStep.perform(LambdaUploadBuildStep.java:81)
at com.xti.jenkins.plugin.awslambda.upload.LambdaUploadBuildStep.perform(LambdaUploadBuildStep.java:66)
at hudson.tasks.BuildStepMonitor$3.perform(BuildStepMonitor.java:45)
at hudson.model.AbstractBuild$AbstractBuildExecution.perform(AbstractBuild.java:785)
at hudson.model.Build$BuildExecution.build(Build.java:205)
at hudson.model.Build$BuildExecution.doRun(Build.java:162)
at hudson.model.AbstractBuild$AbstractBuildExecution.run(AbstractBuild.java:537)
at hudson.model.Run.execute(Run.java:1741)
at hudson.model.FreeStyleBuild.run(FreeStyleBuild.java:43)
at hudson.model.ResourceController.execute(ResourceController.java:98)
at hudson.model.Executor.run(Executor.java:408)

Build step 'AWS Lambda deployment' changed build result to FAILURE
Finished: FAILURE
===========================

The jenkins node that is running that this job has all the credentials it needs to talk to lambda.
For instance, I can create a function via the AWS CLI:

1. aws lambda create-function --function-name alex-foo --runtime python2.7 --role arn:aws:iam::763429161784:role/lambda_hipchat_pr_digest --handler lambda_handler --region us-west-2 --zip-file fileb://foo.zip
   {
   "FunctionName": "alex-foo",
   "CodeSize": 170,
   "MemorySize": 128,
   "FunctionArn": "arn:aws:lambda:us-west-2:763429161784:function:alex-foo",
   "Handler": "lambda_handler",
   "Role": "arn:aws:iam::763429161784:role/lambda_hipchat_pr_digest",
   "Timeout": 3,
   "LastModified": "2016-01-15T14:44:20.353+0000",
   "Runtime": "python2.7",
   "Description": ""
   }

The IAM policy on the instance has full lambda and iam:PassRole (This role also has a trust relationship with another account, which may play a role in this error):
{
"Version": "2012-10-17",
"Statement": [

{ "Sid": "Stmt1452706481000", "Effect": "Allow", "Action": [ "lambda:*" ], "Resource": [ "*" ] }

,

{ "Effect": "Allow", "Action": [ "iam:PassRole" ], "Resource": [ "*" ] }

]
}