I played this at E3 and got in a couple arguments with other staffers about it.
Many people hated the demo.
It had very basic graphics and VERY floaty physics. There wasn't really a game there either.
I was told by one of the reps that the game's creators were inspired by Katamari. After hearing that a lot of it made more sense. They are trying to achieve this world where EVERYTHING can be moved around. As you move these items, elebits pop out for you to collect. With such an ambitious goal it's understandable that the graphics are lacking. The physics was weird too, but I bet that will be tuned more before release. In my opinion actually using the controller to grab and throw items around was a lot of fun.
In short, the demo was a very entertaining sandbox to play in but the actual game mechanics were still very early. I think this game could end up being very good as long as they don't just rush it out as a launch title. If I were you, I would hope that this game comes out sometime in 2007 so they have more time to clean it up.