You have it right Voltron, only the ring of magnets will be spinning, along with the hub cover. It's a very big diameter motor, like the magic pie, so performance should be pretty good, similar to making the wheel smaller. In other words, shorter the spoke, the better the leverage. And of course, more room inside, so their ideas are not all stupid.
There will be a huge market for this. But it won't be guys who spend half the day reading ES to learn how to go 40 mph better. It will be perfect for somebody living in Manhattan, or who lives and works in any large city center. Somebody who's ride is stop and go, and is tired of shifting down every light, or getting to work needing a shower. The people who currently choose a Bionx will love this when it's finally selling. The people who need long range will not.
If the ride is short, or low enough wattage, then the batteries won't cook. But for the distances I ride, range would be too short, or power too weak for what I need. ( I'm weak, hill big, town 10-15 miles away)
I'd be really interested in it though, if the batteries were removed from the motor, and just one set of wires led into the motor. Then I could ride for much farther with any size external battery, and use enough power on the 2 mile long hill.
I'd also like the option of setting power levels without needing a smart phone. I think riding through some cities with a smart phone on your handlebars will be just like riding with a $500 bill taped to your handlebars. Somebody is going to grab it and run.