I was a huge fan of the first LoA. And honestly, this demo seemed a LOT better than that game! I'm not kidding - the fighting system, while not quite as intuitive, is a lot more complex, interesting, smooth, and closer to an actual fighting game than the first game.
Seriously - do NOT listen to the people who say the old system was better. As much as I liked the first game, it was NOT a perfect system. It was simple to learn, but it was very glitchy and awkward. Pure QTEs are not my preference.
That being said, the current system DOES have some bugs that need to be worked out. Guarding is definitely a problem here, as it is way too sensitive about where the mouse needs to be to be considered a "high" guard - too high, and it goes back to a "middle" guard. Here, a slight fusion with the old system might work - give the option for the player to use the keyboard arrows to select the guard position.
If people REALLY hate having to use the mouse, then you could let the system be controlled by spacebar presses or something similar instead as an option. But you've made a huge improvement to the engine in this demo, and the last thing I'd want to see is for you to throw it away for something old-fashioned and dated.