I do respect Miyazaki; his works being really wonderful storytelling. Still I feel like this was a bit of a "get off my lawn," moment. He's old and sees this new age and is either unsure or afraid of it.
Getting AIs to help with animation could be a huge cost incentive. We're a long way from that. This group's attempt shows that, but they also realize it could be used in zombie/monster style games (doom, resident evil, etc.)
He had some good points about pain and how the demo creatures might lack believability because their movements don't make as much sense. But instead of using that as an insult to fail, they should use it as criticism to try to make what they're doing better.
I hope they continue their work, inspite of his response. He was kinda being a dick.