Technically, this is not accurate.
They initially wanted to use the Nights engine but Yuji Naka refused. The Bug engine was used initially but the engine used in the videos was a unique one created by Ofer Alon, who, tired of bashers, has withheld the original code. He has moved on to making CAD programs.
And the playability of a game like this is subjective to the player. If you ask me, I think it was pretty forward thinking. Modern Sonic games like Sonic Generations remind me of this style, limiting the free roaming aspect of Adventures and forcing side-scrolling.