This is massively ground breaking. You'll get it if you've used motion tracking on several game interfaces and had to make perfectly white backgrounds with bright lights to make it work. This is incredibly accurate - really game changing stuff.
Sounds like you're used to bad algorithms. I think there is a serious disconnect between the state of the art in computer vision and what's used in industry.
The demo was cool, but the techniques are not that revolutionary. From a cursory glance through the papers, it is basically AdaBoost (for detection) and Lucas-Kanade (for tracking), with a few extensions.
Not to discount the guy's work at all, it's very cool and does a good job of pulling together existing algorithms. But not groundbreaking in the sense of, say, Viola-Jones was for object detection.
There's a lot of current work going on that effectively splits computer vision into multiple parallel tasks for better results but uses previously well known techniques (PTAM is another good example).
As an aside, I read through the paper and it doesn't look like this could track, say, your index finger separately from other fingers if, for a moment, your hand was occluded. This pretty much bars using this exclusively in a Minority Report style interface (you would need hand pose tracking like the stuff Kinect does). Though, I'm just re-iterating your point that this isn't the second coming of computer vision.
That being said, there are some really good ideas here.
A trackpad with a separate screen would be optimal (so you don't have to look at your hands).
By now, it's practically a 145-minute tech concept video with a plot starring Tom Cruise.
The point is of course that being broadly familiar with a number of things can help you put together a novel thing out of a previously unknown combination of those things.
So, according to him, it is lightweight enough to run on mobile devices. I'd imagine there are also several optimizations that can be done (leveraging multi-core chips or GPUs, for instance) to make the performance significantly better than the prototype he's demonstrating now. Also, taking into account Moore's Law, we may not be able to run this on today's mobile devices, but surely could on tomorrow's. Given that research is generally a few years ahead of industry, I would expect that, by the time this would come to market, the devices will be more than capable.