Disc brakes would overcome this, but that's going to be an expensive retrofit for most cyclists.
So, yes, for those few bikes that don't have conventional brakes, this lighting system may be an option.
That doesn't change the fact that this product will be useless to the majority of people who might purchase (sorry, sponsor :-) it through KickStarter, at least without sacrificing the ability to stop.
The fact that this isn't called out in the video or text is deceptive. There's no way he isn't aware of this serious shortcoming.
Now he has a bigger problem - his new system appears to work by wedging into the spokes where they converge at the rim, so he will need to supply the correct radius of strip for every size rim on the market.
Still, this is a pretty neat addition to this increasingly crowded bicycle light accessory space.
When driving in my car at night, I would occasionally notice some bicycles with reflective strip around the tires. Car headlights just light them up, making it very easy to see a bike from the side. I finally found that many Schwalbe tires have this reflective strip (e.g. http://www.peterwhitecycles.com/schwalbe.asp third paragraph).
I saw a bike the other night with a half-dozen or more of those in-spoke reflectors. Very visible in headlights.
It easily dismisses the need for the nori lights however good lookin those are.
Here's a video showing what reflective tape looks like in the dark: http://www.youtube.com/watch?v=Bm5muia44XI&feature=relmf...
As for actively illuminated lights, there are a large number of commercial products available. I'm too lazy, but anybody tempted to donate to a project melodramatically promising to "save lives" in the name of somebody's beloved grandfather should first drop by their local bike shop and see if perhaps it's already possible to light themselves up however they want for a modest amount of money.
Most bicycle lights also intentionally spit out a little bit of light to the side to also make you more visible. I'd recommend investing in a good front light and good rear light (with built-in reflector) before bothering with wheel lights. Wheel lights are cool if you're willing to maintain twice as many lights as you need (batteries, remembering to turn them on, etc.), but I prefer ease of use and so will not be getting these. (My rear light automatically turns on when there is both darkness and vibration, and it's a reflector, so there are few cases when I ever need to think about it. I keep my front light with me at all times and just need to press one button to turn it on. And I carry spare batteries, just in case.)
Some people have a lot of fun with it: http://www.youtube.com/watch?v=YU_O-OKuaeI&feature=relat...
I don't see any safety problem with "pimping out" your bike with rim lights that change color with the bike's speed. Just realize that you look like a twelve year old kid when you do. And make sure you have real lights for actual riding.
The major difference seems to be that Lunasee is powered by a hub dynamo (rather than batteries). It's also currently only available pre-installed on some bicycle models, and as an aftermarket part for motorcycles, but they say they plan to sell an aftermarket bicycle part, too.
We would also like to do a battery aftermarket version, but it does come with complications (rim, battery life, etc).
Thanks for your comments... Lunasee team
But then they insist it couldn't possibly work. So they do dumb things like requiring bike helmets, but not reflectors or brakes.
Sorry to gripe, but I've seen far too many undeserving products (I'm not making any judgment about this particular one) make the cut while deserving ones get rejected. And if you have a web app you're trying to fund, forget it. Why hardware products make the cut and software ones don't is a complete mystery.
We have tried to contact Nori Lights with no response so far. We have invested time and money to protect this -- and hope Nori Lights and interested consumers will respect this.
We appreciate all feedback.
Lunasee Team