Not the first I've heard of this type of product. I think someone years ago brought my attention to a product known as "Real Doll"... take a look on google to see their webpage. Good for a laugh if nothing else.
As for that video, clearly someone created the audio and made a joke at the expense of these products. And it was a good joke. How far will that industry go? Well that question I think is fairly apparent. Far enough to make that video a reality in some form. There are lots of people out there with expendable incomes, both male and female. Lots of people with relationships, or self-image. Lots of couples looking to add a new toy for their enjoyment, etc.
At the end of the day, its just like they say; Sex Sells...
That said, perhaps we could make a company designing better audio for the dolls!? nothing like a little surround-sound-self-gratification! haha...