The good:
- The base concept is good, it works better than it looks like it will from the videos.
- Nice selection of controls (although I'd add that you should allow 'custom' as well).
- Being able to add pictures/videos is an interesting concept (although not in the demo, so I've not tested).
The bad:
- The story is unnecessary and too cutesy. It may lose you customers in the traditional music/rhythm game demographic (Audiosurf, Beat Hazard, Rhythm Zone, etc. There are no stories or even introductions in these for a reason).
- The story text is very cramped, it didn't make me want to read it. About the limit for this sort of thing is shown by Braid, which has some large blocks of text. Gamers don't want to read lots of text, they want to play the game.
- The game is very clearly driven by the art team who've run unchecked and don't seem to know when to restrain themselves. Perhaps this was a purposeful art design decision, but it's one that I really dislike. When characters are over-animated (jiggling about all over) it really puts me off, but I accept that might be personal opinion.
- The key press detection is too harsh and needs more clarification as to when exactly you should hit the key. As a Rhythm Zone veteran I shouldn't be left thinking the beat detection is broken after missing a load of notes on the first level (it's not broken, it's just awkward and left me 'scooping' everything).
- It crashed when I tried to start the second level in the demo (the only thing I maybe did unusual was use a gamepad as the control scheme).
- Menu controls are all mouse driven but gameplay has the option to be either keyboard or gamepad only. Being able to select from these control mechanisms would help.
- Stopping the music entirely on a mistake is a bad idea. Perhaps temporarily reducing the volume and playing the 'bad' sound effect instead would work better. Guitar Hero gets away with this because it still has a background track to keep beat to. This isn't so much an issue on Easy, but I can see it would be on harder difficulties with more notes.
Sorry if that sounds overly critical, that's not my intention, the game is solid, it just needs some work to be aon the same 'level' as some of the more polished music games around.

I'll play some more later and add to these and I'll try to expand on any if you want. This is all working from the demo.
I'd like to see what else gamesTM said about it. I note you have a quote from them on the website as "
A mechanically sound rhythm action title..." which is what I would call it.
Might want to check on your forum as well, it's got a lot of spam posts.
Hope I've been fair there. Call me out if you think otherwise.
EDIT: The demo seems to crash whenever I move to a new level in story mode. Restarting it allows me to then play it, but it's annoying.

EDIT2: I can't play the demo on medium at all. It always crashes at some point in the first story mode level.