I don't think there's anything necessarily wrong with making a specialized system for a specific case, and doing things that would be outside the scope of a more general theme.

Instead of thinking of it as a "theme", think of it more along the lines of using WordPress as a sort of platform upon which to build something else. How it's implemented internally isn't really the point. It's all just code, after all. WP as a platform offers several advantages over a more do-it-yourself approach.

Heck, even I've done crazy things with WordPress outside the more traditional scope. If I need to write some quick code to automate some one-time task, and I want to do it in PHP, then I'll frequently just include wp-load.php so that I can get all the little handy time-saving WP functions I already know how to use... even if what I'm doing is more of a command-line oriented thing. Saves me a bunch of time. It's obviously not suitable for general use, but for a one-time need, sure, why not? The platform I know lets me develop quickly and easily.

If you're building a custom-website-creating-engine, then building it on top of WordPress makes good sense. You get a fully functional post and page system, taxonomies for various forms of categorization, arbitrary key/value data storage mechanisms, a complete user management system, an extension loading mechanism, and loads of helper functions. The fact that he's implemented this "as-a-theme" is rather secondary. He could have written the same thing entirely from scratch and nobody would bat an eye.

So, yeah. Looks pretty neat to me.