I don't understand why everybody is so amazed with cloth physics. It's not really new and has been around for over a decade. It's a question of computational power and a decent engine. This is probably based on the same Agea Physx engine with some improvements to reduce/remove clipping.

What's more interesting is gameplay mechanics. I don't know what could be done here - this Batman wouldn't be able to use the gadgets and scanners that our Batman does. He would be restricted to basic grapples and a flashlight.

My guess is that the game never went anywhere because nobody could figure out how to make it attractive compared to Arkham City/Asylum. You get a Batman without the gadgets and you take away half the attraction for most people. This would have to be much more of an RPG/detective story. Batman would actually have to detect and investigate without the benefit of computers & scanners. It could of course be awesome, but unfortunately this game wouldn't stack up very well compared to the Arkham games.

The first step is that somebody really good would have to figure out the gameplay and write the game story. Create a whole world from scratch, essentially, without relying on the existing & rather familiar world built in the comics.