It looks likely that a function of the mirror system within the brain was at play here. Very interesting.
It seems to be a similar effect using tactile and visual stimuli to what can be achieved through hypnosis, altered states of consciousness and suggestion, namely overriding what the conscous mind believes to be true by use of overwhelming contradictory, if primarily false, information.
The article doesn't mention if the cameras mounted on the mannequin or the female experimentor were stationary, and the participant therefore had only one static viewpoint. I suspect they probably were, since the participator being able to look around would have had to illicit the exact same action from the mannequin/woman at exactly the same time in order to transmit the 'correct' information.
Hmmm... I would be curious to know what the male participants described the percieved experience of being in the woman's body actually felt like. What, if any, sensory information, other than that provided technologically, led them to that conclusion... illustrating the mind 'filling in the gaps' and creating sensations from nowhere in order to build a working scenario that the conscious mind would accept.
The technology itself must have been very, very high quality in order to fool the eye into thinking it was seeing 'reality' and not just an image.
It seems a little like the movie "Strange Days".