Well damn, that was awesome looking.
I'm very glad that they made the change, though, as the gameplay itself didn't seem to have evolved far enough in that build. However, the visuals and atmosphere are top notch. Looks quite a bit more detailed than the final game in a number of areas. Leon's model was great in RE4, but that version of Leon looks much better (particularly his coat). The shadows were nice as well (would have been even more impressive if all objects were casting them, though). The scene lighting was nice, but the vertex flashlight beam is a bit rough (as it is on various other survival horror games that aren't on XBOX).
It's a shame they didn't keep some of those ideas in the final game, though. That seemed as if it could be a bit creepy (which the final game was not). I liked those dolls, for example. What could have been even coolor is, when they became active, not only soak the screen in that blue tint effect, but also cut the view distance down to Silent Hill levels or something (have the darkness literally crawl into the scene and block out your view). That could be freaky at times (if they used it sparingly).
The core game design present in that video is just too dated, though. The trimmings are great, but what was actually being done looked a bit dull. They also had too many things "jump out" at the player...
I wonder where this video came from?