I believe the logic is that tabletop style RPGs (to which this is similar) can evolve in an infinite number of ways. Video games are constrained by the rules of their program.
Video games also tend to be extremely predictable. The method of play is usually decided for you, and it's really impossible to deviate from it by more than a bit (Civilization games, for example, ultimately always require you to weather the attacks from the other players). In this game, on the other hand, the direction and content of the game can shift greatly over time in directions unexpected when it was envisioned.
What we see as emergence in video games is not nearly as dynamic as a truly infinite system based in reality. They're both emergent, just games are not infinitely so.
The logic seems sound to me.
The idea sounds good, but in fact i can't see what games can't do (even if they are not doing it yet).
The problem is that there is a lot of implicit rules at work:
The first implicit rules is coherence, when you introduce character, there is implicit rules about how a character behave, think and evolve, whether they are realistic or fantastic. Ther is implicit rules of logic that constrain the way objects behave and react in the world. There is also a process of building up on existing event and following the flow of event. The theme is likely tied to the first set of events.
Creativity come into solving existing paradox, filling holes, extending the universe (by making use of hammer space or "fog of war" to pull out previously undefined things) and tying unrelated events into new set of informations. From an abstract perspective, it's very similar to a game of go, except with no boundaries. Each stone is akin to a fact, each set of connecting stone is comparable to a logic connexion.
Basically nothing you could not achieve with procedural construction based on some motivated generative grammar. The paradigm of game as language rather than closed system. If you have a strong set of modular template (mimicking the implicit rules and acting as the grammar) and a strong AI/player imaginations that fills the creativity actions list earlier, game can do it.
So far game only make static procedural generated contents (mine craft, spore) but you can argue that game rules define procedurally the experience (ai, gameplays). The problem is to what degree and with what. Think of traditional fixed board vs tile laying (like in Carcassone) in board games except for creating rules and creating token instead of space. I bet some board games are pretty close to this.