I don't know if the whole idea is dead yet, but it did seem pretty tone-deaf to do luxury party barges as a way to showcase an already hated exclusive product.
"creating places in the world to experiment without regulation, and that people's expectations of privacy are wrong, etc."
Both of these sound like divergent and large scale, but they don't seem unreasonable.
People let the world in front of their eyes convince them of its permanence / correctness - when in reality we need to break some of our cherished beliefs to move forward.
This seems like part of the noise of a company trying many different things and cutting their losses when it makes sense. The only real difference is that we don't see many of these other projects because they can fit in a building
Not saying this was a big loss for Google, but it wasn't "a few hundred thousand."
They could be demoing all Google projects and ventures. Robots, 3D mapping phones, Project Loom, etc.
Their more-interesting projects would make a particularly-popular exhibition in an interactive museum. And that's about it.
e.g.
Why would someone want to spend more than 5 minutes on a 3D mapping phone? What would they do with 3D models, aside from playing Interior Decorator in their own living room or Hollywood Makeup Artist on their own face?
Those are neat ideas, don't get me wrong. But while more apps may eventually be found, it could hardly justify a specialized gadget for most people as-is. Particularly when traditional mobile device cameras are turning out inferior-but-quite-usable versions of those same apps.
Google Glass is similar. There's been a handful of really compelling use cases for HMDs for more than a decade. But the general public has never had more than about a 2-minute-demo-reel level of interest. And Google hasn't found/developed anything in Glass, yet, that changes things for people who already have a magical slab of glass in their pocket, everywhere they go.
(Google's actually dug a slightly deeper hole, in that people's 2-minutes-worth of interest in Glass was quickly dominated by how incredibly unsettling connected cameras can be, when they're potentially on anyone, anywhere. Including on the anti- and a-social, in places where people had traditionally let their guard down.)
Google Glass will be neat around v3 or v4. I want augmented reality, not a portable monitor for notifications only. Some people that require both hands for work and need those critical notifications could really benefit from this though. Sports taking pictures would be useful.
Google Glass isn't for everyone, but it's definitely useful to many people.
You're right that most developers wouldn't go to the barge, but think about the places that the barges would dock. It could potentially draw some of the more wealthy population to come in and see all the interesting stuff their building. They usually have Apple products (because more expensive is better, right?) so getting them to take interest in some of their other products could be profitable.