As Grue points out below, a new VERGE demo called [War of Fire] has been released. In addition to being cool and the first new demo in a while, War of Fire is special because it is made by Wooly, who designed the ancient V1 demo Gods' Destiny, which we mysteriously do not have in our large collection of now-unplayable V1 demos.
Gods' Destiny was one of my favourite original demos; although I can no longer remember the intricacies of it, I do recall that it had very nice cartoony graphics, good music, an ambitious plot, and FMV. War of Fire has all these things, except FMV. And really, that would just make the file bigger, so it's all for the best. I'm quite fond of the art Wooly did for his original game, and War of Fire is in a similar style, with black outlines and interesting, exaggerated objects. The major characters have cute speech portraits, and the characters are 16x16 on the map and 16x32 in battle, which wins oldschool points. The battle system isn't entirely up and running yet (skills are not implemented), but it's in there, as are shops and a complete menu system. There are several items to use and a few different pieces of equipment.
The middle paragraph is where I say what is wrong with the demo so as to maintain an appearance of objectivity! War of Fire has a rather awkward interface, combat balance seems off, and there are a couple of noticeable bugs. For the most part, these are 'demo problems,' and I'm confident that the bulk of them will be ironed out in later releases. No dealbreakers, to be sure.
What stands out the most about this demo is the ambition of its environment system. A little clock at the top of the screen keeps track of the time of day, and night changes to day visibly, What's especially awesome is that in the main town, people go from place to place in real time, so you can watch people come out of their houses in the morning and so forth, or go and bother people at night while they're in bed. The weather also changes -- there's rain, thunder, fog, and wind, and these effects show up in battle as well as on the map. (The wind is actually kind of annoying because it slows you down when walking against or perpendicular to it, but the effect is cool.) All in all, the game has a few problems, but if you let that stop you from checking it out after such a dry spell, you are a bitter, loveless soul hardened against joy and wonder.
Edit: As previously stated, there's a patch for this demo. I've linked it below for convenience (-Grue):
