Oops, heh... missed this thread.
I'm 10,000 lines of code into this, so i think i have a head start on the competition. The artist working with me is the guy who originally started the hoax too, so that helps.
I have a developer's diary going here:
http://www.digitpress.com/forum/showthread.php?t=131204
But for a more technical description, the game is about 95% done. The last thing left to do is create the background designs. The version of the engine in the demo just creates a simple background design, then draws "interesting" things over top to make the details. The new graphics engine uses meta-tiles to draw each background. It gives us a chance to make a much more detailed game.
As it sits now, the game has 7 levels, 5 bosses, and a bunch of cut scenes to progress the story... Subject to change, blah blah blah...