"You need pacing if you want to immerse someone in a game"
True, but you do not need to immerse someone in a game for it to be fun, and if you have a fun demo thats more than enough already. Yes, story and immersion are nice and all but they should be left to games that do them well.
"Question: What's the last demo you played that really made you want to run out and buy the game?"
Recently; Left 4 Dead, Red Faction: guerilla and InFamous - Two of which i'll likely never buy though unless work managed to hold out this summer. The thing is while i think all these demos/games have some story element that was by no means the hook - the hook was gameplay, fun, and any story elements can bugger off because they are not important here, though if the game proves me otherwise its got itself a fan.
Come to think of it i cant remember a time where story in a demo has hooked me... Okami, nearly, maybe.. erm... Yeah i think im dry. Oooh, Dragon quest, theres one, though i typical J-RPG fashion it had one story section of the demo and one gameplay section, and i think thats perfect the way it is.
Anyway the overarching point is that if its a story-based game then yes a story based demo would be a good idea, but in your example of resident evil the 'story' is only really there for the hardcore fans, while i played it because it is a gameplay based game and i wanted a taster of the gameplay. I know its all over the gaming world right now to blend gameplay and story but in all but the best cases its just two elements combining to create less than the sum of their parts.
Edit: side note, did anyone notice way back when that the DMC4 demo was harder and more fun than the shown sections in the full game?