How could this become a feature in cycles render?

That is implemented in Fstorm Render, if you want to use it in Blender, the only way (at least for now) is to wait a little and use LuxCore Render. They will implement it in the next version. (you will see more about it in that link)

These are just proxy objects. And yes, Cycles needs them before it will be considered production ready by most of the world.

Also, off topic, but dear lord I always forget what an absolute mess 3DS is.

Looking at the video, isn’t this more in line with the general Blender feature-set instead (ie. perhaps in the form of the node-based particles being worked on)?

Most of the work is in the Max viewport, and not in a rendered view at that.