1. It'll be more like an intro really, as most of our work to date was directed into putting together the 'engine', backgrounds, character creation and me messing up with dozens of image layers to find the sweet spot in how the hell are you supposed to rig a model appropriately, so you don't end up fighting against the model instead of animating it.
Also, even as it could come as a surprise to you, some time has passed since the last time I've looked at the demo. I can't tell you if there's going to be many "quests" in this first version or not.
However, we're going to launch monthly updates from now on. And when I say "update" I mean a balance act between content (plot & events) and features (game mechanics).
What this means is that LoK:R won't necessarily grow 'sequentially'. If we feel something of Chapter 1 should be changed to enhance the experience for new players, we'll do it even if we're working on Chapter 2 at the same time. I feel, for instance pretty bad about how I've rigged Krys. It's giving me headaches to move her boobs easily and reallistically due to bad bone parenting and weighting. On the other hand, the Kitsune has been a breeze because I knew I was doing from the start. So a rerig of K is going to be needed asap. Not now before the demo, of course, but soon. And that's work that will impact on my general schedule... Good thing I'll work on making games full time by June's end.
2. That I can't honestly answer. It's more in the territory of Spartacus. At this moment there's no penalty from having 'too much sex' because she's even supposed to have a lot to increase her 'sexperience'.
In fact there's going to be an event in which you'll need to have a high 'level' to have chances of "winning". Although if you do or not, that won't mean a game over screen.
To be honest, we will need feedback from you guys to shape those kind of things. And not only in the form of polls. Some kind of brainstorming will be needed I think, although we all need to keep things realistic and think that even though we're three people, feature creep is still a very real threat. Anyway, it'd very possible that one of our first goals is to find a good writer.
Thank you for your interest as always.