That was a fun demo! I noticed a couple things, however. There's a certain kind of counter that you can walk up, I believe it had a cutting board on it. None of the stairs go anywhere except in the Inn, but you probably knew that. All the houses are very big, which could work, but Basho is supposed to be poor and run-down, and I thought the town before that could have been more cramped, especially since it's supposed to be fit into a small forest clearing.
The world map is very nice, and it's refreshing to not have random battles on it! In the battles though there are a couple things that could improve. The game makes you wait for everyone to stop fighting before you can put your commands in, but the whole time the enemies' gauges are filling up and it's really aggravating. Would it be possible to have the player input the command when their bar fills up instead of standing around? Usually games with an ATB work this way. Also it doesn't tell you when you gain a level, which confused me at first. I kept grinding on the mountain because I didn't know I was getting anywhere.
Dominic's character really confuses me. All the Leebles love him and nobody seems to notice or care that there is another human in the village. He gets his own big hut even though he's lazy and doesn't do anything while the main character gets completely ignored. And Dominic's right eye (our left) is really out of place, it got a bit distracting.
Other than that the only things I saw were objects you could walk through (pancake guy's basket, a lamp in a house, etc.) and that there are no items for regaining MP. I actually liked that Aero was really weak because she was the one with Heal and usually there's one character that functions like that (Aeris, etc.). However you can't be skill-centric and not have MP-healing items. The small quests for items were really nice though, I liked the quest with the mushrooms. It's interesting to see an alternative to "find a chest that's impossible to see" for getting items.
Also about Verde Grotto, is this part unfinished? There was the stuff about it being haunted but nothing came of it, and there's no reason as it stands for them to be kicked out of the Inn, especially since the woman on the 2nd floor sees Aero talk and makes it sound like there shouldn't be a problem. Speaking of which, why is the guy in Basho surprised that Aero can talk? All the Leebles can talk.
Anyway, not to be negative, but of course there are always things that could be tweaked a little. I really enjoyed the demo, even the hand-drawn treehouses. Honestly if they were better positioned they'd be perfectly fine; if anything I liked the hand-drawn Leebles and backgrounds better than the boring RTP. You could have just hand-drawn everything if you wanted. The new ones are okay but the walkway is too bright for those houses.
 I'm glad you liked "Traces"... I think it's going to fit Liele quite well as soon as she enters the plot