This is theoretically a big step up from Megaman Powered Up, which kept environments stuck on a "flatter" course. On the other hand, because this 2.5D uses the Paper Mario technique, it's kind of a cop out. Even without 3D sprites, I've seen less flat representation of 3D in the way the hand-drawn sprites of Strider 2 were used. Yet, if the characters were 3D, it'd be a step further in the right direction. I'd still like to see a wholly 3D Megaman game that works (because I believe it can if given enough care and thought), but this wouldn't be bad at all if it was less flat.
But, please, let's get past Megaman 2. Yes, it was/is awesome, but it's time to move on with the franchise. MM9 took baby steps, but it was sort of a middle ground move. (Actually, this 2.5 fan game project seems more innovative than 9). But, anyways, I need something more daring at this point. I think the franchise is kind of hanging in the balance.
EDIT: Now that I think about it, I guess Megaman X8 did this 2.5D (turning around corners and such). It was solidly done, but I think this fan game project demo took a few more creative risks that I liked: with the elevator leading to the vanishing blocks and where there was a few things off the beaten path and such.