Just my thoughts on the matter...
First, I am very interested in that kind of interactivity innovations. Head tracking, face recognition, motion tracking - great to see anybody trying new things. And I do believe that the Natal technology may work as well as advertised. As others have noted, time will tell which genres work well with buttonless control schemes and which don't.
But the Milo demo movie really upset me a bit. MS & Molyneux are making this software look like something it can't possibly be, to the point of faking, imo. All over the internet, you see gushing comments like "ZOMG11!! how do the do it?!? this is making my head explode! what will Milo do when I ask him to kiss my butt? LolOLOLZ". Well, Milo would probably tell you he hasn't done his homework. Or that he likes your blue shirt. Same result when you ask him "what's a bread?", "stop that british accent" or "play the drums".
Milo's voice in the vid was clearly prerecorded, not synthesized. So he's got a limited repertoire of phrases, just like every other software of that kind before. And unless voice regognition technology made a HUGE jump forward recently, I don't believe for a second that Milo could properly understand sentences he's never heard before. And let's not get started on the AI necessery for a semantic interpretation of a new sentence...
Normally there would be nothing wrong with a software like this. And the rest - face recognition, interactivity - may very well work. But I feel like MS is warming up the old promises of the "Virtual Reality / Artificial Inteligence / Cyberspace" age, buzzwords other designers stopped using for a good reason: Because technology is too far from actually delivering any of that.
I hope you know what I'm trying to say... it's an intriguing idea, and I don't mean to diss it. But that video... "Milo, I'm a bit nervous..." "Nervous? You?" They making it look like Milo understands random sentences (in british slang). That's a bit shady.
What do you think?
Currently playing: NSMB (Wii)