Hi Davek,
The iRule will intercept the incoming HTTP Request from the Client and can log the original request prior to a rewrite. Once the rewrite is complete it will send the modified request to the downstream server, at which point the server will only be aware of the modified request.
The LTM is a full Proxy, so it maintains a two connections:
1. Client to LTM - From the Clients perspective the LTM is the Server.
2. LTM to Server - From the Servers perspective the LTM is the Client.
Does this answer your question or does it generate more questions? :-)