but I do know that the demo did have a virus tucked away.
Just because a antivirus app says that something is a virus it doesn't mean that it really is a virus - though it is right to trust the antivirus' positives at doubt.
The thing is the programming of the input routine was so horrible that it captured the keyboard inputs of the whole keyboard whether the window was in focus or not.
This is a trait commonly used by spyware that grab your keyboard inputs and save it or send them somewhere - or keyloggers in layman's terms, which also brought the "false" positive. (Quotation marks because the application is the culprit here, not the antivirus)
However, while noone really bothered about S2HD itself, most newssites - not only inside the scene (a good example being Yahoo's news service) - were all like "Attention! Keylogger/Virus found in Fangame! DO NOT DOWNLOAD!"
That - and the bad attitude of the programmer LOst - lead to the firing of him, the bad press and severe lack of communication inside the team however resulten in the cancellation of what could have been a great project.