Great update, definitely a lot of steps in the right direction. The aiming system is definitely getting much better. I still miss the original system (a lot) but this works well enough to return the game to playable and fun status for me. I think with some more refinement the path you are beating down will work great. Still, I have to say I miss the freedom of the 8 Way system that you guys designed originally. I know that's at odds with the bulk of your feedback, but I quickly came up with several different gamepad configurations that worked exceptionally well for me. As it stands now, I stlll feel like I'm fighting the controls a bit at times, mainly some of the oddness with the contextual system that Pepisolo has raised. Despite that, I feel better equipped to deal with fights in enclosed spaces than I ever did with 4 Way aiming, even using the Misery Test (loading into a cavern with a less-than-optimal mage class for spelunking). As another poster mentioned I too would appreciate the ability to fire at a downward angle off the edge of a flat platform.
I also have a minor critique in the writing department. At the beginning of the game, when your character is having their "pep talk" with Demonaica, your character delivers this line; "That thought has been in my thoughts often." Or something along those lines. This feels a tad clunky to me, redundant. Perhaps something along the line of "That thought has been on my mind..." or "That thought is with me often..." would serve the game better.
The changes to the macro-strategy sound like good stuff to me as well. I like that once Demonaica smashes something it stays smashed. Like Godzilla radiation or something keeps you form coming back to rebuild. It's just that totalled. Plus it fixes the issue of perpetually kiting Demonaica between two points, which was something that I suspected was possible.
Another little niggle is Auroch Warriors that spawn underground in tight spaces seem to be impossible to deal with if you can't leap over them. At least without a suicidal bum rush. I could be missing a subtlety, but they feel out of place and overpowered in those circumstances.
Great work Arcen. It was frustrating to test the game while it was in a state I considered broken, so it's nice to have fun with it again.