I worked professionally as a programmer in the game industry for 17 years.
I've seen this exact thing many times. Here's the real problem: Game industry is a CREATIVE industry, and as such there is always INFINITE amounts of work to do. Even on a product that you consider "done", there's still infinite work to do, bug fixes, "stretch goal" features, etc. How do you do infinite amount of work? Why work infinitely of course!
Oh and the DEMO thing? I've gone through that exact situation before. Usually called a "vertical slice". Management just sees this as "We don't need the whole game, just this little part to show". That might be ok for the art department; but guess what, for programmers that still means that major systems have to function and not be buggy, so basically, the game. Now everyone has to crunch.
I put in my time in the slave pens of the game industry, and it needs to change. It almost ruined my life and marriage too. I remember walking into a bosses office and saying (at like 7pm!) "I have to go home now... my wife is threating to leave me." and his reply was a simple huff and a "Well, I guess if you have to."
So advice for any of you youngins that want to get into the game industry. Do it before you get married or have serious relationships. You must have NO LIFE in order to survive, and when you get one; its time to get out. Would I go back and not do it? Hell no. Working on games as a job is magical and awesome. I wouldn't give up those years for the world; but it almost cost me the world.