You have to remember this is a concept. As it is, as LEGOs, no it won't fit because it is to deep. However, the width and height are very close. I have GA gauntlets and I don't know for sure but I think they are a bit smaller than others. Now say I replace the LEGOs, which are about the width of a CD case, with sheet metal/aluminum which could be considerably thinner. Also, the gears are about the same width. Replace those with narrow gears. There are 6 layers total in the concept.
<font color="black">`````````````------------------
<font color="black">````````````|<font color="black">`````-------------------
<font color="black">`___________|_____|__________________________________
|____________________________________________________|
<font color="black">``|<font color="black">`````````````````````````-------------------<font color="black">```````|
<font color="black">```-----------------------------------------<font color="black">``````````````````|
<font color="black">```````````````````--------------------------------------------
Hopefully that comes out right. Anyways, the dotted lines are the blades. This is why I am saying the layering is still wrong (although its really not a big deal, but not accurate in my eye). Compare the blade layering to the color coded diagram I made earlier. Optimumly, this is what I want (all squished together as much as possible)...
_________________________________________________________
<font color="black">``{}---------------------------------<font color="black">```{--------------------}
<font color="black">````````````````````{}--------------------------
<font color="black">``````````{}------------------------<font color="black">`-----------------------------------------{}
_________________________________________________________
(Okay those took a LONG time to do

)
In any case, the Legos cause this device to be wider than it needs to.....similar to the diagram. But if you can eliminate all that space in between and narrow the main wall that they are attached to, the total depth would be decreased significantly...enough so that it should fit inside the Gauntlet. Of course there are space limitations and possible Gauntlet modifications necessary, but with something like this you should not think of why it won't work but rather why it will. That's why I asked for measurements. With them, I can create accurate dimension and perhaps a 3D CAD model of the real thing.
Regarding the torque of motors vs gears, I really don't know the answer. Mini motors like the ones for those TINY cars probably wont be enough. But bump that up to the motors for, say, a Mini RS4 or Kyosho Mini-Z, now thats definetely enough (probably too much) torque and speed.
Picture of Kyosho Mini-Z to get an idea of motor size...
Even without a motor, you could spin a gear manually (or push and pull the wide blade) and everything would pop out. With MMM's you could move the lever. A motor would be awesome, and possible, but I see it as a second phase after the mechanics are solid.