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The gun is supposedly heavy. The body shields and the helmets are too.
In the video I see dynamics of a Styrofoam toys.
And it's not about this particular video.
Now-days I see wrong dynamics in almost all of multi-million mega-busters too.
In my time [insert a lengthy rant here]

Just poor miming skills on the part of the actors, although they kind of get a way with because its done in a video game "style". They could use something like Endorphin to add a bit of weight/dynamics to their movements though.

I think you're thinking of the Euphoria engine, a specialized physics engine for human(oid) bodies that's a big step over ragdoll. But even that's not exclusive to LucasArts. It's in GTA IV, too, at least.

Before they get this working properly.

At least one company already figured out movement. Speech and conversations are probably next.

http://www.naturalmotion.com/euphoria.htm

People like the FTEQuake folks have integrated Quake1-3 together, which allows you to play any map from Quake 1 through 3, or to incorporate things like shaders into the Quake 1 experience. It's actually kind of neat. Take a look at the screenshots at http://www.fteqw.com/ - it's all I use nowadays when I play FPSes. I'll play some Gears cooperatively with my friends, but nothing yet has beaten the original quake experience for FPS fun.

The euphoria engine looks pretty interesting. I've been doing some work with motion analysis, and so the work they've done on it really impresses me - apparently you can code animations using it without keyframes or motion capture, which is pretty neat (if it works). The tech demo video is here - http://www.naturalmotion.com/euphoria.htm

...to protect the creative people who drive the sales of these games

That kind of stuff would also save time, after the considerable initial time spent building the AI system, on content creation by no longer having to build in that kind of stuff in the levels themselves (then playtesting it and revising). You could just make a level, drop them in, and they'd goto work, assuming the AI was solid. Looking at products like euphoria, there is clearly a market for some incredible middleware packages to be developed in this area, making the potential investment for game devs much easier to manage.

They use a program called "endorphin", by a company called NaturalMotion

the sweet thing is there is a free trial learning edition here:

http://www.naturalmotion.com/ele.htm

and i have nothing to do with them in case anyone is wondering

hmm kindof funny that I hear about this on fark.com but from what I've heard this game is going to be sweet. (http://xbox360.ign.com/articles/702/702389p1.html ) Right on the IGN website too lol. If this actually pans out I think it could be one of the greatest games of all times easily. Just imagine hitting someone and watching them fall back realisticly and not only fall down but respond to their environment while falling down and possibly even catching themselves all in a natural manner. Anyhow here's a link to the natural motion website http://www.naturalmotion.com/pages/le.htm it even has a non-realtime demo you can play with.

They can throw out the motion capture guys already, check out Endorphin. It looks better than mo-cap...

right now it only works for pre-rendering stuff (afaik), but it works on the principles that you're describing.

I think you have confused '3D' as storytelling and actor direction, rather than a mean to make visual presentation of a story. As far as art style is concerned, you have missed one thing: cel-shading. That feature keeps the old 2D cartoon look while saving a lot of time of redrawing characters and scenary. Combining it with emerging technologies such as dynamic motion synthesis AKA virtual stuntmen, the computerized 3d becomes a more 'natural' than the 2D cousins, but with added benefits of full 60 fps motions.

Speaking of Japan, even the Japanese artists have been adding computerized/cel-shaded effects too, and not just in robot cartoons.

There were over 30 people involved in that production, from designers to artists and programmers. No "new development tool" is going to change that in any meaningful way.
How about endorphin development tool? Combine it with genetic algorithms, teach your bots the rules of baseball and leave them running for a week. Come back and import all that into the game.

The truth is that a lot of content in the games is still created completely from the scratch. GTA levels were created in 3D Max as one huge model. Most character models are too created in 3D Max as one huge model. The best you can hope for is that a game would dynamically add some objects (grenades, other equipment) to the model. Of course, with the emphasis on high-quality bumpmapped models the source art must have 1+ million polys and that takes time. But the alternative (a smart, a rational, a forward-thinking one) is to use an automated face generating tool (drag a bunch of sliders and you have a 99% realistic face in 3-30 minutes), add a customizable generic body, touch it up with some other existing tools, add cloth from another tool and you have a Hollywood quality model. Now import some movements/AI from endorphin and you are ready.

Some of these tools exist, but they are sometimes too crude and not used widely enough. Because of that R&D costs go up and profits go down. BTW, piracy is a constant factor and doesn't actually cause the decline in profits.

It is kind of peculiar that all of their demos have a rather quick and abrupt hit/fall/tie/don't move much animation sequence. At first it is amusing but it appears all the animations are like that. Thought I'd point that out.

Heres the link to what they were talking about in the article. Walker Evolution

This next one shows off a lot more of what they can do. Mainly they abuse their models.
Natural Motion Show Real (14.5M Divx)
I love the tennis ball in the crotch clip. Insert bob saget joke here.

Here is another movie (mpeg, 1.5 MB) demonstrating a set of legs learning to walk over time.