This is a pretty clever way to avoid the uncanny valley for VR videoconferencing. I assume we're a long way from photorealistic avatars based on the holoportation demo from MS.
The Holoportation video feels a lot less cringe worthy and cheesy to me. At least there's a lot more body language that's being captured, which feels more natural. Their example of being able to record real life in 3D, play it back, and walk around in the experience also seems more innovative. But of course it's much further away from being ready to use unlike Spaces.
The challenge VR videoconferencing faces is that by its nature, the people who are participating are wearing headsets that cover their faces. Even hololens headsets are going to get in the way of eye contact.
Avatars get around this by projecting a person who isn't wearing a headset.