This is both the most awesome thing I have ever seen in my life and the most anger-inducing, soul-crushingly depressing, harrasing, overbearing, sly, scarring, molesting, upsetting, devastatingly awful, evil, nightmare inducing punch to the face I've ever received in an April Fool's.
Creating a whole badass engine just as a joke instead of doing the coolest thing ever. I am disappoint. And hurt. And scarred.
...seeing that screencap, I start to imagine if actually programming the fucking game wouldn't be easier. (it'd not, but to do that video entirely on after-effects is an ungodly amount of work, for naught)
I don't want to sound too optimist, but I think they still are developping the real game.
There were screenshots of the game from the joke's author's site dating from as recently as 26 July 2011: http://snowgale.chips.jp/
Checking the site where these gifs come from show that as of 30 March 2011, the artist was comparing the old character portraits and the new: http://forest.her.jp/moricchi/2011/03/3.html
From the comments on Nicovideo, I think the peoples are still greatly interested in purchasing such a game.
So, although it might take some time, I think the prospect of a real Valkyrie Profile-like Touhou game has yet to be lost. Hopefully they will be as motivated on making a real game than the length of things they went through in order to make a (in)famous April Fool's joke.
That's some pretty impressive lighting effects showcased in the first link, although the 0.04 demo version youtube video you linked to looks a lot less... impressive than what I expected.
