The sticking point for me is, or perhaps was, the limited installs. If they got rid of that, this would be more or less like Steam. What the Hothead guys are saying is that the “limited installs” thing is just so they can reserve the right to deal with the same key being used by many different people. As I read it, this isn’t like the EA system where the fourth attempted install results in rejection and you have to call up tech support to get back in. The system as designed will allow unlimited activations, but the language in the EULA is there to give them wiggle room in dealing with obvious and flagrant piracy. If they see the same key being used hundreds or thousands of times, they will have to manually block the account, and the language in the EULA is there to allow them to do that.
This is not the only possible interpretation of what has been said so far, but despite my normal bitterness, cynicism, and paranoia on these issues, I’m actually subscribing to their version of the story. They’re talking about re-wording the EULA to make this more clear.
This doesn’t solve the “will the servers still be there in 10 years” concern, although this is a problem faced by anyone who distributes a demo which contains the unlockable full version.