Given the relatively negative tenor of my past two posts, I should point out that I really do think there's a lot of potential in a project of this sort, if approached properly.
(I'm speaking of my own view here, of course. "Properly" for me isn't the same as "properly" for everyone else, and I'm not saying it should be. Just saying what it would take to hook me personally on such a project.)
There's a lot about the feel of 1st edition AD&D that I liked. I liked the rarity of certain types of magic items. I liked the slower advancement, though to be honest, the way we played, it was only a little bit slower than 3E. We usually averaged 4-5 games per level, rather than 3.
I liked the fact that the imagery and feel of the setting wasn't "uber-fantastic." Don't get me wrong, the "magic is relatively common, armor and weapons don't look like their historical equivalents" imagery of 3.5 is just fine for some campaigns. But I preferred the default being a slightly more historical look at things. I liked the fact that magic items were rare, and couldn't often be purchased regardless of the size of the city.
I definitely preferred the art. Call me old-fashioned, but I found the black-and-white drawings of the 1E books far more inspiring and fantastic than the current art. I mean that as no disprespect to the current artists, most of whom are quite good. It's purely a style preference.
I liked the lack of focus on miniatures. I liked the fact that some spells had risks associated with their use. And I even (don't tell anyone) occasionally miss the different classes advancing at different rates.
Now, all that being said...
I would never go back. The magic and feel issues are easily dealt with through simple tweaks in description. I ignore the minis. And I like the current class system so much better than the old one that the classes all having the same advancement isn't a problem for me.
I like the multiclassing, I like the skills, I like the fact that you can customize characters in ways the old system simply wasn't designed to handle. I like the fact that PCs can create magic items, though I do make the process a bit more mysterious and involved in my settings. I like the fact that the system is unified, and everything is based off the same rules set.
So my problem with what I've heard of Castles & Crusades isn't that they're trying to recapture the feel of 1E. I want them to succeed at that; more power to 'em. But I think it could be done, at least to an extent, without sacrificing the options and customization that make 3.5 the superior system when it comes to actually building the character you want. If character-customization is one of the elements they're ditching, I can't imagine anything they could offer in its place that would make the system worthwhile to me. Doesn't mean they won't find a way; I hope they do. But I can't see it from here.