Yes that is how it works. It simply determines which focus point is used, instead of fiddling with the arrow keys on the camera body. It only needs to triangulate your pupil and corneal reflection, which is trivial. Not figure out how far your eye is focused.
And almost none of these technical barriers described would be an issue at all. Keep in mind this already WORKED something like 10-15 years ago. And eyetracking technology has improved much much faster than the number of focus points has increased.
For example, @Judo: the precision and accuracy of eye tracking systems today is sufficient to measure a smooth trajectory of your eye DURING a saccade. In other words, while your eye is flitting from one point to another, the system can take multiple samples and plot out a smooth curve, which can be used to infer information about your cognitive biases and subtle attentional allocation to objects off to the sides of that trajectory (they will "pull" the curve closer or further from a basic trajectory). This is fairly easy affordable technology to do even that nowadays. And position wise I believe they are simply built into the viewfinder inside. And yes they probably use infrared LEDs, which cost like $1.20.
If it is something that people just don't give a crap about though, like Derrel suggests, well then okay. Seems pretty awesome to me though. Say goodbye to ever focusing and recomposing again.