Actually, this concept has done very well in marine applications requiring very compact power handling and manouvreability:
http://en.wikipedia.org/wiki/Voith-Schneider
But marine applications are not so weight critical as a VTOL aircraft, and even so most vessels still use propellors.
For helicopter application the problem always comes down to achieving the lowest disk loading that can be achieved for a given performance envelope. This system will ingest air over at best an ellipse, which for a given size and weight will never beat a helicopter ingesting air over a disk.
That said, hats off to these guys for making the effort, and making a little bit of transport history come true.
