Right, it's definitely no small task, so I don't want to do the usual drive-by glib "do this super hard thing!" post
Since we're using similar technologies and similar games (Defender's Quest is an AIR-based tactical RPG of sorts), I'll share a bit of my experience in case it's relevant to you. I'll just share some data, so do take it with a grain of salt as it's only one data point, and feel free to do with it what you will.
This is your announce thread, so I don't want to sidetrack it talking about my own game (which is why I didn't post any links to it) unless I have something relevant to share with you.
That said, here's the data-dump:
In our experience, not only does a browser-based demo vastly increase your demo-plays and exposure rate (which also makes it easier to get journalists to write about your game), it also lets you use flash portals for distribution. We set up 4 different "buy" pages for our game to do some basic tracking, we had one regular "buy" page that is linked all over our website, and then three "demo_buy" pages that are linked to from various versions of the demo. The first, demo_buy.html, is linked from the browser demo we host, which was quickly "stolen" and uploaded to a bunch of tiny flash portals, it's also linked to by the download version of the demo. The second, demo_buy_kong.html, which was linked from Kongregate's version of the demo (before we switched to selling the game with their on site currency "kreds"), as well as on all the flash portals that steal from Kong, and then there's demo_buy_ng.html, linked to from the Newgrounds version and the portals that steal from NG.Here's some quick stats:
-17122 hits - demo_buy.html (demo landing page, our site and minor flash portals)
-12348 hits - demo_buy_kong.html (kongregate demo landing page)
-2644 hits - demo_buy_ng.html (newgrounds demo landing page)
-13898 hits - windows demo exe
-431 hits - windows demo torrent
-negligible hits - non-windows demos, both direct&torrent
-7340 hits - buy.html (regular buy page, linked from all sources EXCEPT the demo)
That basically says where people are coming from. BOTH the download version of the demo and the browser demo link to demo_buy. So, although buy.html could include some hits from demo players (as well as people who bought the game sight-unseen), the demo_buy... links only
come from within a demo, so we can be pretty sure that's what those hits represent.
Also note the demo_buy hits represent people clicking through
from the demo - actual demo plays were much higher (since not everyone wants to buy).
We had more raw hits than sales, obviously, but the correlations are pretty tight and we had other stats to confirm that sales from these sources matched those ratios. Based on some other tracking (coupon codes & some other things), about 80-90% of our sales have come from Kongregate+Newgrounds alone
(We're not doing "microtransactions", as in in-game items and other piecemeal stuff. The NG demo just links to our buy page, and on Kong when we switched to Kreds all we are selling is the full version unlock).
Most of the revenue is from Kongregate, but even at a far distant second, Newgrounds still exceeded all
of the revenue we gained from a very positive Rock Paper Shotgun review.
I have no idea if you would see the same results we did, but I think there's something to browser-based demos and using flash portals for distribution. Our full game was way too huge for flash portals, but using conditional compilation in FlashDevelop I was able to create a simple boolean trigger I could switch off to exclude full-version-only assets and publish things with compressed images and audio settings, etc, to get down to a reasonable file size.
If any of this is interesting to you, I'd be more than happy to share some more of my tricks since we're using similar technologies.
Your price point might make your game a tough sell to the flash portal crowd (they are cheapskates for the most part), but a browser demo could still be useful on your own site. Customers keep telling us it's the #1 reason they bought the game.