Let me translate for you Grump:
a city within a town = is a property that contains most everything someone would need to live, work and play in very close proximity.
walkabilty = is the ability to walk from your apartment, condo or townhouse to places to eat, drink, shop or even possibly work.
alternative transportation methods = not building a sea of parking lots anticipating that everyone at the site is going to drive, by themselves. This can mean things like designated Ride Share drop off and pick up points like at the airport to bus stops for public transportation.
The idea is not 'who is going to walk there' but rather if you live there you walk rather than drive. My assumption they are making on the demographics are people who purchased large homes in East Amherst and Clarence in the 80s and early 90s are looking to downsize but remain in the area. So you create a 'all-in-one' type location for those who can afford it. And there are plenty I assume.
I also think they are trying to create an environment similar to the Village (that you love) or Elmwood. A place that becomes a destination on its own and as a whole rather than a specific part. For example, instead of saying let's go to dinner at [restaurant name] and then [activity at a different location] after...how about we go to Eastern Hills and figure things out once we get there.
Lastly, there is a large number of people like me who grew up in Clarence, Lancaster or East Amherst that most likely won't have a connection to the Village. They visit and I think this type of destination with a hotel is a prime option than the 'thruway dumps' that currrently service this part of the region or having to go pretty far into Amherst or the City for something nice.
A good example of what I think they are going for is Santana Row in San Jose -
http://www.santanarow.com/