Nintendo did the exact same thing 3 years ago. They didn't deliver on all of the promises, but it's really the same idea. Just change the names: Sony-Nintendo, knight-Link, skeletons-stalfos.
Same idea, yes, but the execution is not even close to similar. I suppose Twilight Princess is a fun game and I'm actually refraining from buying it for my GameCube because I hope in the not so near future I'm going to buy a Wii and have more fun with it on that, but: Waving the Wii controller around in Twilight Princess is nothing more than a substitute for a mere button press, as far as I know not even the direction you wave it influences the way Link swings his sword in the game. In Sony's tech demo however, sword and shield of the character are directly moved by the controller, there don't seem to be any predefined moves and animations.
Probably closer to Sony's tech demo would be the upcomming "Wii Sports Resort" game, as it includes a sword-fighting minigame. There's also an archery minigame, so you can even pretty much directly compare Sony's tech demo to Wii Sports Resort, as it also includes both.
Here's a video of the sword-fighting in WSR: http://www.youtube.com/watch?v=D4r3zbjVopA
And archery: http://www.youtube.com/watch?v=rq41rT-_WZc
But, I guess these videos just show that the Wii Controller including the new "Wii Motion Plus" also detects movement accurately and it would be much more interesting to see what developers make of it. I suppose the minigames of the new Wii Sports will get boring after a short time and what I've seen of Red Steel 2, which includes sword-fighting and shooting, also wasn't too interesting for me.