That is a good point. But if the author distributes not the data but some tool that translates said data, plus some diff, then they can say they do not distribute said data, and the original is required. Yes, it would be more work, problem-prone and the distribution package would be larger.

Also, not making money from it means little to rights-holder. Losing money is. People could be downloading this game instead of buying Tomb Raider 2.

Even if he doesn't distribute the game file assets themselves he's not in the clear however. FreeCraft was an open source engine that could extract the assets from Warcraft 2 or Starcraft, which Blizzard pounced on and pommeled into the ground. The code still exists but under a different name now, and IIRC they had to not rip assets out of the official games.

It really is up to the owner of the IP whether they explicitly permit someone to do this, or if they just sit by idle neither permitting nor denying it, but holding on to their ability to jump in at any moment and put a stop to it. In the US at least, unauthorized software tools that extract copyrighted data from a game for other unauthorized usage could be considered a tool for assisting in copyright infringement under the DMCA IIUC.

Not making any money from something like this would fare well for someone, but not give them any rights to do so. They'd just look better in the eyes of a court than if they profited in some way, so any punishment for infringement would likely be less.

Wargus is still around (wargus.github.io/). FreeCraft was too similar to WarCraft, so I guess that was a key issue (causing confusion on the mind of the consumer).

It is up to the IP owner to decide what to do and when to do it. And it may be up to the courts to decide who is right. Seeing things from the perspective of the IP owner, if they allow this to pass, it may encourage others to do similar works, and your property value may be diminished. The precedent you have set (allowing some work) will work against you, thus I don't see much hope in the future of this project as it stands.

Yup, precicely.

By just checking the site it seems like there was no new progress/releases since August?
Anyone knows if the project is still ongoing?

Nvm just checked the Twitter of the Demos Developer.
While interestingly enough the demo is still online it seems like there is no intention at all to continue the development