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How big is the demo? I've just reached the Marine area, and wondering how close to the end I am.

You're close. The demo omits the last 2 zones, Space and Fortress. once you exit the Marine zone you'll get a message thanking you for playing the demo and asking you to buy the full version. 

I have been told that the demo is too long, but I wanted to give people a fair chance to decide whether they really wanted to finish the game before paying for it. if a player gets to the end of the demo and says "meh, that's good enough, I'm done now", then that's OK with me.

Yah, if your goal is to sell copies, I would agree with them about it being too long. 

I'm currently working on a new version to fix bugs, clean up some graphical issues, etc. I may release a new demo that only includes half the game instead of 75%. But to be honest, I'm less concerned about money than that people enjoy playing it.