I understand that Notch has said it is cancelled. He posted some stuff about why (People trying to hack at his source code/Too much pressure over the extensiveness of his design/unhappiness when he was working on it etc), so it seems likely it will never come out, sadly.
I played the demo. It looks like one of those open source projects that die in alpha because there are not enough devs. I really do not want to buy it, and the demo has almost no gameplay apart from fly, pew pew pew, land, pick up, fly...