Looks neat. I can't see any of the 'embedded functionality' you mention though.
I might consider making some of the keys longer in order to make the edges match up nicely, but the tradeoff is that it would make it much harder to find keys with legends that worked.
For example the spacebar itself becomes a function key.
This could be programmed such as - Space + Shift = Capslock toggle, Space + Number Row = Function keys.
Yes the size of the keys are not even - that's not the point; those could be blank dsa or something to make it work. The entire goal is to eliminate as many stabilizers as possible.
I like your concept.
I would like to give you some advice in order to make the best out of SpaceFN:
Using Space+Shift for CapsLock is probably not a good idea. You should not overload Shift, because Space+Shift+L, for example, is a very common combination (it's Shift+Right_arrow), and it will trigger an accidental CapsLock.
Don't overload Shift or Ctrl. You can overload Enter if you prefer, I have left it unused in the SpaceFN layout so it can be used for some function, Space+Enter for CapsLock sounds good.
I have also left Tab unused, but your keyboard does not have a Tab key.
How are you going to trigger some key combinations, like Alt-Tab? There are so many Alt- combinations that it sounds a little bit risky to assume you can map them all to the alphabetical keys.
I would also like to warn you against overloading the letters located on the left side of the keyboard. In SpaceFN the letters located there are generally not overloaded because there are already very common Ctrl- chords with these keys. Not overloading them allows you to type these common chords without even thinking about pressing or releasing Space.
For example: when editing text it's common to type the following sequence:
arrow arrow ... (you go somewhere)
Shift-arrow ... (you select some text)
Ctrl-C (copy to the clipboard)
arrow arrow ... (you go somewhere else)
Ctrl-V (you paste the text there)
If you don't overload the left-hand letters in the SpaceFN layout, you can type all of the above while pressing Space all the time. You need to press Space to generate the arrow (Space- I J K L), and you can keep Space depressed when you type Ctrl-C and Ctrl-V: nothing wrong happens. This little trick frees you mind and makes SpaceFN really more comfortable to use.
So in a nutshell: I think you need dedicated Win and Alt keys, and it's much better if you overload only keys located on the right-hand side of the keyboard.