Well, it's definitely an interesting example of art. Is it art? Maybe, certainly provides a unique argument. Though I do wish it went more in depth than "Good boy / girl" and "How disappointing" being the only two reactions.
I did chuckle when it second-guessed my gender, something I wish games would do a little more often. Positive reinforcement works fine, but negative reinforcement can be just as useful. Why don't I get scolded when I die? Why doesn't Grunt point out how terrible of fighter Shepard is and question his own reason for fighting under him whenever Shepard dies? That seems like a great way to further characterize him as well as make me feel insignificant to a character that I want to like me. And I'm just pulling that out of my ass, I'm sure there are a million ways to better use negative reinforcement like that.
Actually, I just remembered back in Half-Life: Opposing Force there are a number of fat donut-ridden security guards there for comic relief, and when I got to point where one couldn't follow me, I shot him to take his ammo and as he died he said something along the lines of: "Hey! I though we were becoming friends..." I was so mad at myself for killing him that I had reload the last quicksave. Not exactly negative reinforcement, but it makes the player feel bad for doing something stupid, rather than simply saying, "Yeah, you probably shouldn't have done that, but no one's going to care anyways".
In case you skipped all the previous posts mentioning this, it reminds me a lot of Stanley's Parable (link below) a Half-Life 2 mod that is also a kind of meta commentary on designing player experiences, kinda similar, though a bit more cryptic.
http://www.youtube.com/watch?v=gblvOhnv2k0