I'm sure others will find this reminiscent of the Minecraft in-game sounds, which makes me wonder whether they have similar logic to create on the fly, or just a pre-recorded looped audio file.
I'm quite impressed by this. I can easily imagine some pretty sophisticated productions with such a small amount of code. For instance, your Better Looping example is basically a step sequencer.
I think you still need flash fallback for web audio so should use a mature library like Sound Manager. I looked through the JavaScript for this and saw nothing like that. Might be good for a demo or hackathon or something that doesn't need to work everywhere.
Sure, it's limited to those browsers that support the Web Audio API. The point of this project is to show off what the emerging API is capable of, and to keep the overhead low. Adding those kinds of dependencies would defeat that purpose.
Do you really want to be the guy who says "But what about IE?" every time someone does something cool targeting modern browsers?
It seems there is always one.