Without watching the video (baby is asleep) I can't comment on the specifics, but I don't see why in principle it can't be lost in friction/heat/etc. If you push your bike pedal and part of that force goes to bending the rear triangle instead of turning the rear wheel, then the frame flexes back again when your pedal force relaxes, how does the release of that stored energy translate into forward motion? Having your rear wheel going in any direction other that straight ahead doesn't seem like it is going to help
What did GCN say?