This video made by Phonebloks, shows a working prototype of an assembled phone. The functional phone is shown at the end of the video for roughly 15 seconds, where the phone is assembled and booted up to run an application. The phone is lagging, as you can see in the video, but it is still much better than the previous prototype that didn't quite work so properly (froze after starting up).
The Google Ara project is very innovation, no doubt about that. It will change the mobile market, like custom PC's did. Having a phone with hardware of your choice certainly is a great idea. It's not just more affordable, but also easier to fix. You can just change the separate blocks and upgrade specifically whatever you need.
The Spiral 1 prototype was just the beginning. As explained in the video, Toshiba made improved chips for the Spiral 2 prototype, which you can see in the video. The video demonstrates that Project Ara is currently going at a steady pace and we can expect a working model soon. The Spiral 2 prototype will be shown at the next Developers Conference, in January next year.
For those yet unfamiliar with the Google Ara Project, here's a quick introduction. The Google Ara project aims to create phone models that can be assembled with custom hardware of the user's choice. Just like custom PCs, you can pick whichever hardware you want and assemble them into the blocks to create your desired phone. This way, you can change only one component or hardware of the phone if you want. If you want to change the Camera features, you simply have to change the Camera hardware block for an improvement.