Just finished the demo (v3)! That's very cool.
My favourite bit was the "This is a place of balance. All are welcome here, regardless of appearance." That was a beautiful level of hint.
I agree with other commenters who said that mouse look is probably not worth the fiddliness - apart from anything else, I prefer to do most walking around with the keyboard, and it's weird to have the guy keep looking in the direction where I last left my mouse. Especially early on before you have the lantern.
Still, I'm keen to see where you go with this concept in future! Thanks for sharing this work, it was great fun!