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If we were talking about a game in playable form that was being demonstrated in a public way I would be worried ...

Being that this is still (really) early, shadows should come for 'Free' with some of the lighting techniques they had in the demo video, and it doesn't take much to produce much better shadows (they were possible on the N64) I think it is way too early to assume that they're cutting corners in order to produce better graphics in another area.