An interesting proof-of-concept for the vertical landing technology, but still a horribly impractical vehicle for space flight unless we develop a much more efficient propulsion system.
The current Falcon 9 [http://www.spacex.com/falcon9.php] has a medium payload capability even with 9 of those Merlin engines (compared to just one in the video), and a much larger fuel and oxidizer tank than the rocket in that demonstration.
The only way that vehicle would ever reach orbit even without a payload would be to boost it to the upper atmosphere with either a 1st stage rocket, or some kind of massive rail-gun technology, or something like that. Perhaps SpaceX is developing that other technology concurrently, but until they demonstrate it reliably I'm still going to be skeptical.
