I'm with JK on this one; the physics should be ironed out before level design is finished (or even seriously started), so that the levels can be designed to suit the physics.
A lot of the SNES games did this really well, and Mario World jumps to mind as a game that was particularly meticulous about this.
This is (or should be) even more crucial in a game like sonic, which relies so much more heavily on the ins and outs of the game's physics for things like loops, quarter pipes, and so on.
It could still be a decent game, but for a game like this to live up to it's full potential, it seems to me that the physics should be perfected before the level design gets too far along, but what I've seen so far suggests that this isn't necessarily the case.
As I've said, I'll still give the game a chance when it comes out, but this video has not made me any more optimistic.