Putting ragdoll-style contraints on the bones of the rig aren't going to solve the issues they were seeing in the avatar tracking. It may provide something of a safety net, or even allow them to come up with several solutions to a particular image, and choose the "best" one.
In the end, the problem was the lighting on stage, as I said.
It worked much better on the show floor, where the lighting was set up much better. They also didn't show any demos that involved multiple people at the show, that I recall, except in their silly "what if" video. The number of problems with solving that are downright staggering, and they aren't going to solve it without turning your living room into a fully-lit lab.
For it to be useful for games, I believe a tracking marker will eventually be required. Sony's wand demos were pretty good -- far superior to the simplistic 2D stuff MS was showing, and the PSEye, frankly, has done for years. Combine that with Natal's nice camera and the software they are working on.. then you might have something feasible. Even a wristband with a reflective patch might do the trick.
The media's craze, over what basically amounted to a premade video and some very simple show floor demos, still kind of boggles me. The "what if?" imagination that MS has stirred up with Natal is really something. But it really is just that, at this point -- a dreamy image. I wish them luck though -- if they succeed it'll really be spectacular.
