I found this project the other day when I was web-surfing and thought it was interesting as a rather romantic concept of story-carrier-as-object, and that it was neat as far as the parallel electronic .PDF execution as well -- rather nicely straddling the line between the older and newer ways of reading, I think. I'm not sure how the design execution actually ends up working though, as I'm not a subscriber and there unfortunately do not appear to be examples up on the site. :(
From a more business-oriented standpoint, she also gets into an interesting profit structure, especially as she's announced on her blog (warning: some of her other musings are potentially NSFW, but the linked entry is fine) that later this year she will be condensing these into a self-published book on Lulu, which will serve to let more of her audience in, only later than the original subscribers, and have the side benefit of archiving them as well; subscribers still enjoyed the benefits of exclusivity and the actual objects for the past year or so, and what she'd be doing now is somewhat analogous to releasing a live album several months after a series of live concerts.
(For some background -- Ms. Valente is a fantasy writer in Maine with a solid-but-not-ubiquitous following, and she seems to have a pretty devoted online community with her blog and her site...and this project, obviously.)