This was a few years before Sweden joined the EU, but yes, I think the lack of a physical connection was one of the main problems.

From what I've read the test drivers also thought the car was too difficult to drive, with the joystick being too reactive. I wonder how much of that could be solved today with modern software and stability control tech.

I can't find it now, but I do remember a similar prototype with mechanical wires (not electrical) that was supposed to solve the regulatory requirements. That joystick looked more like a cyclic control from a helicopter.

Having played enough video games that use joysticks for steering I don't want to drive a real car with a joystick. Crashing in Mario kart or Grand theft Auto because I sneezed is fine but not in real life.

Exactly. The control needs to have both an intentional and major motor movement from the driver. Modern steering wheels have the same benefit as the original iPod wheel. Easy for small movements, even accidental ones; possible for big movements.

Also funny that they had the ability to swap to the passenger to drive it. So acceleration/break for one person, steering for another? Really not a good idea.