Imagine this, if you will: a visible character would traverse a relatively open world, just like in classic King's Quests. Then he or she would stumble upon an obstacle - for example, a bard wishing for a lute

From this point on, the word "lute" (or "an instrument" on higher difficulty modes) would appear in the list of objectives, the same way objects do in typical Hidden Object Games. To slove this quest, the player would have to travel around the game world until he spots the lute and clicks on it - again, similarly to HOGs. Of course, several quests (objects to find) could be active at any given time.
We're currently working on another HOG side project similar to this, but the main character won't be visible. A lot of elements are shared between HOGs and Adventure games, so it's always a good source of attracting more casual players toward traditional adventure games; those who prefer a more challenging experience. Truth be told, though, I'd much rather make adventures than HOGs.
I didn't get that from the article. He referenced "internal enthusiasm" and "favorites among the staff" as to "why King's Quest." Care to quote what you're referring to?
article wrote:AG: Have you been following The Silver Lining and AGD Interactive’s King’s Quest remakes? Did these projects play any role in your decision to make new KQ games?
DG: Yes—in fact Cesar Bittar from Phoenix Online used to work here at Telltale, which is how I personally got my first look at The Silver Lining. The fact that the King’s Quest community is enthusiastic enough to put in the kind of time and sweat that it takes to make games like that gives me a lot of confidence that a new KQ title is a good idea. Of course, I also know that that audience will have high and specific expectations that we’ll have to live up to. But what else is new?
He admits that we've put a lot of "time and sweat" into remaking the King's Quest games and the community is interested in them right now, and that gives him confidence that it's a good (financial) idea for TellTale to "reboot" King's Quest and seize the moment. They're not doing this just for fun - they're doing it to make money. Telltale is a multi-million dollar company who could go after any IP they want and make just as much money by doing something else. But by Dave Grossman's own admission, they went after the KQ franchise because of its current popularity in the community. Smooth.
What's also ironic, is that the TellTale forum is currently filled with worried posts about them possibly not being able to pull this game off. People are posting polls and giving feedback to guide their developers in the right direction. But if they actually require such feedback, and don't already know how to make a great KQ game to the satisfaction of the fanbase, why on earth did they acquire the license? Seems like a preemptive move, which will now have limiting future repercussions on the series and licensing of the IP, regardless of whether their game turns out good or bad. Telltale looks out for Telltale.