I've taught tai chi since 1989.
Can it be used to fight with? Not unless you have a teacher/trainer who knows a lot of wrestling and or/striking first. It wouldn't be my first choice for something practical. The principles it has are great, but can be more easily applied to a wrestling delivery system. As with so many chinese martial arts - fantastic concepts replaced practical stuff a long time ago. I was already teaching a traditional martial art when I found tai chi. It made me a lot better at my first art, but I would never claim to be able to 'fight' with it. (After spending years watching MMA, I don't claim to be able to 'fight' anyway).
Is 'chi' real? Not that I've ever personally felt. Tai chi done properly teaches really good body mechanics (like any good fighting art) which can make it seem like you're doing amazing things. If I stood in front of Muhammed Ali, I would have thought he was also capable of magic. I've seen stuff I couldn't explain - especially when I was competing in Singapore and the Phillipines, but I whenever I asked to feel it personally, I was told I wasn't allowed to, so in my books it was bogus shit anyway.
Would I do it again? Most definitely yes. If nothing else, gentle exercise and meditation are good things for you and a nice balance to lifting. As a eurasian with some gym time under my belt, I was always lucky enough to have 'the look' (what people expected when they wanted a martial arts teacher). The pussy that that got me over the years was enough to make it worthwhile. Probably drained me of 'chi' for life though!
What's the dude in the clip doing? No freaking idea.
If anyone is interested, Tim Cartmell, BJJ blackbelt is also a very highly accomplished tai chi (and hsing i/pa kua) practitioner. He would be a good teacher to learn the combat aspects from.
I also like this guy - although it's not with resisting partners