VaM is using DAZ3D elements, not something fancy self-programmed prototype stuff. That was and is a huge advantage. There is a gigantic pool of semi-compatible (but copyright protected) content you can use for VaM. I am somewhat sure, that "simply" using ready made DAZ-Figures was the key to success in a time, where MeshedVR couldnt even dream of the success VAM now has. Those figures are not that pretty and next gen at the first look, but available and flexible. With the new Genesis 3 and 8 figures, we will get some new great features. The new done graphics engine will have some more very interesting features, too, that will add way more realistic figure rendering. Not like in the video above, but way better than now.
VaM is not only about character creation. That could be indeed made way more realistically, if you only want to see a single figure staring at you like a dress-up doll. The thing about VaM is INTERACTION with those figures, espacially IN VR. When VaM came out first, it was nothing more than a somewhat ugly DAZ-figure-clon hoovering in the dark with only some few morphs and basic clothes and ugly static hair... But we all were enthusiastic about that, because you could grab and move those figures around with some kind of physics. That was the key element. There are some more VR games with well made dress-up doll elements, personally I think of IMAGINE games, but all of them lack the element of direct and intuitive interaction. Maybe you are able to wiggle their breasts a bit and make them show some pretty poses, but you simply can't grab their ankles and spread their legs open wide. Direct interaction is a great thing in VR!