The people over at Sega-16.com held an interview with former Sega of America employee, Peter Morawiec (link). It's a pretty interesting read, but the best part is at the end when they provide a video of an unreleased Tech Demo he had made for a new Sonic game based on the ABC Cartoon designs. Features include new moves (throwing rings, buzzsaw attack), larger sprites, and "3D" environments.
You can find the wmv of the video linked at the bottom of the article, but here's the YouTube version.



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