I'd say what they are doing isn't all that bad.
They are not like True Blue or Cobra. What they do is that they _always_ host the stable version for free, and only allow donators to download the beta versions.
I say it is cool, as long as its just beta versions they don't release publicly. After all, it gives an advantage to donators, while everyone can enjoy the cake when its done being baked. I see no problems there.
Its just like www.securitytube.net
(awesome place if you like IT security). The owner there has a _****load_ of videos, courses, recorded lectures, all that ****. Everything becomes free, when it has been there for one year. And its fantastic stuff that there is there. It only gives some advantage to the donators that helps keep the site running, by allowing them access to the videos first. The owner has no intention of keeping stuff away from you.
Another comparison could be to 4chan. Moot (the owner) introduced "4chan passes", which allows donators(/people that buy the passes) to post there without having to type in that retarded captcha... Everyone can still post there.
Now, I will address one problem/flaw with Project 64's model.... When something is a beta for the past ... 7 years? It becomes quite retarded that it is still being kept unaccessible. I mean... securitytube would suck as well, if he decided to keep videos away from people for an indefinite, but surely long time, and then suddenly just release them.
But then again, I actually have tried 1.7... It is truly a beta, it ran A LOT less stable than 1.6... and while I had less graphical errors, it crashed everytime for me on both my computers, when running on fullscreen mode and something popped up in the background (Yes, I could disable skype to avoid those popups... but have fun disabling all popups... from things such as your antivirus and from windows as well... only to enable the important ones later on). There was no way they could release the 1.7 I experienced publicly (and yes, I tried the latest 1.7 build too). In that sense, it is just some "bonus" that donators could try and download the unstable 1.7 and see how it ran on their system.
I guess, the true sad 'problem' with Project 64 is that development seems to have stopped on it, and we cannot blame them for that.... I was really happy to hear with this post, that they seem to have started working on it again though!
I haven't tried 1964 and Mugen lately, so I don't know if they have reached the level of project 64... But the last time I tried them, they seemed below Project 64.