I realize this is still in the early stages of development so the final concept may need more tweaking, but I don't understand the logic behind increasing the game challenge when the player becomes stressed as a way of DECREASING gamer rage.
This sounds more like a system designed to channel rage into its purest form.
[EDIT]
I did a little more digging, because this didn't make sense to me and from looking at the linked sources, I got the wrong idea from reading the article. Still not sure if it would actually work to "solve" gamer rage, but it sounds a little less crazy now.
The developer designed a simple FPS for use with his prototype which responds to the player's biometrics by increasing the threat level. From the sound of it, in order to successfully play the game, the gamer needs to maintain control of his stress levels, as measured by heart rate. If his heart rate gets too high, the game becomes very hard to "punish" his response. Theoretically, repeated sessions with this simple game could train you to stay in better control of your heart rate under stress. I'm not convinced it would actually reduce your frustration levels, but you could learn to control your body's response to frustration using the biofeedback provided by the device and in-game experience.
The basic idea of using bio-feedback to help control physiological response is pretty sound and it might work as a form of therapy for gamers looking for a way to reduce their rage in a controlled environment. On the other hand, adding this as a game feature in an actual video game (i.e. "a game that can smell your fear"), especially a multi-player game, and you would be creating the opposite experience - Dark Souls on steroids. Without the over-arching therapeutic goal, it would be an exercise in frustration for its own sake. Some gamers would love it for the extreme challenge, others would hate it for making a difficult experience even harder. And knowing the game was picking on you personally because of your stress level would make it that much worse.
Not my cup of tea, frankly.