How long does the usual prototyping phase last? How many developers are generally employed in this time frame? How many programmers/artists would one need if you were working with an engine like Gamebryo? What is the usual payment model used in demo development? Up-front payment? Salary? Compensation after completion? I am envisioning this to be for a demo of a 3D 3rd-Person Role Playing Game. Thanks for all of your help so far guys! Darkan P.S. Excuse my ignorance...

There is no such thing as a usual prototype phase. All games are different and a prototype is a proof of concept of the specific game elements you feel need to be prototyped (in other words it is different for every game).

Development is a resource/feature/time triangle. The more of one you have the less of another. If you need W features and you have X resources then your protype will take Z. If you only need V features it will only take Y. If you only have A resources then you can only have D features in G timeframe or F features if you extend to J timeframe. So, your prototype will take as long as it takes, depending on the features you want and the resources available.

How many staff do you need? See above.

The usual payment model is the same as the usual prototype (IE there isn't one). If you are a commercial development house seeking to attract industry experienced staff then you better be planning to pay them. If you don't have any money then you can't pay them and it is pointless asking - you just have to ask for inexperienced hobby developers and do the project as a hobby (and hope some of them stick around to the end).

Quote: P.S. Excuse my ignorance...

Put simply, if you don't know all the stuff above then you aren't nearly ready to be undertaking a 3D RPG.