Josh Marpet here @quadling on twitter.
Ok, few misconceptions. The launcher we are currently using is a Spike's Tactical 37mm launcher. It is smoothbore, and we don't need to stabilize it with rifling. Once it reaches altitude, it "turns over" and starts heading down. That's when the parachute deploys (standard model rocket parachute, no need to reinvent the wheel).
So if you get hit by it, it's not hard. It's essentially drifting down.
As for a keychain camera, I own several of them myself. Awesome little devices. Our system, however has live video. We don't store it on the camera. It goes to the receivers, using analog 5.8gHz wireless. There are short and long range receivers. Short range we are currently using is battery powered, integral screen, removable/replaceable antenna, and MicroSD slot for storage. Long range has RCA cables to hook up to recorder/TV/Projector.
We designed it to be used by Airsoft, Ground Search and Rescue, and SWAT teams. We wanted a system that could be used with equipment they probably already had, and had training on, namely 37mm Flare/smoke/CS launchers.
As for the NFA comments, absolutely true. Our presentation makes it clear that we used 37 mm since it is smoothbore, with no DD (destructive Device) tax, and the rounds would also carry no DD tax. An M203 goes for ~1500 or so. Without stock or attached ar-15. A full 37mm launcher with stock? ~600USD. Big difference. Oh, and no DD ($200) tax. Bigger difference.
Hope this helps. I'll try to check back and answer more questions later.