Indeed, it would be desirable to handle looking with the HMD's built-in tracking. Body rotation may or may not be desirable (e.g. users may be seated while playing or we might not want people spinning in circles when they can't see their physical environment).
Note that this is an initial prototype to demonstrate a design concept, but not any specific implementation. The concept can be applied to create an infinite variety of implementations (including AR), but each instance would be specifically tailored to the experience at hand.