It ran fine on my BPPC/040 with the sole exception of sound. The sound would always get choppy when there was a lot of stuff going on and no amount of messing around with stuff ever helped that.
You should drop your workbench screenmode to some low resolution, 640x480, for example, before starting the demo and make sure you don't have any other BVision screens open. The reason for this is that the RTG system doesn't seem to handle paging very well.
Rather than the workbench screen getting paged into fast ram and you getting all that VRAM for your demo (which it needs for framebuffers, z-buffers and texture data), you seem to get whatever unfragmented dregs are left after your screens have taken the lion share.