They have a firm handle on principles outside of Nintendos realm. They don't care about the hardware, using Natal you don't even need a seperate console you could simply package the whole lot into a TV. Right at this moment they are selling TV companies on the principles of Natal and I've even seen a video of a TV using the NXE interface, using a gesture interface with Xbox 360 games. The Xbox 360/Natal is a service delivery platform and to say that the whole concept is limited to just games is simply incorrect. Natal is the closest thing to a Windows incursion in the home electronics space. They don't need to make the 'best' interface, they just need to make Natal one of the most adopted interfaces.
You're almost certainly a bigger expert on the workings of Microsoft than I am, so I'm willing to give your assertions here more wieght than my own. That said, there are a few things I don't understand. First, what patent protection did they gain from buying the Z-Cam, if they were already deep into their own, almost-identical technology? And why have they failed to patent such a thing? Because from all that I've heard and read, the Z-Cam and Natal are essentially the exact same technology (at least so far as the camera goes). And it strikes me as a very strong coincidence that the head of Natal was hired at about the same time as the Z-Cam was sold. I'll admit this is just a suspicion on my part, but I feel that it is a very strong one.
As for the rest, I again agree that this is Microsoft's ultimate goal. However, I see this directed against Sony (as much as its "against" anyone: as you correctly stated, its closer to being "for Microsoft" than anything) rather than against the Wii, which is the original statement with which I disagreed. Natal seems to be Microsoft's first attempt at realizing the goal of using gaming as a trojan horse to dominate the entire living room (although personally I feel this attempt will fail). Since this is, in your own words, a mostly-non-gaming strategy, I don't think it has much to do with the Wii's core strategy (which is all about gaming). Again, I think we're in agreement about the scope, but we quibble on the minor details about how this relates to the Wii (which is mostly a side-issue in the grand scheme of things, but since we're on a gaming site, it takes on more importance than it otherwise would).
I have to admit im not nearly as clued up to what Sony is up to as I am with Microsoft. I pay much more attention to the latter than the former. I do think you're a little rigid in your thinking about the different strategies. Try to think in a more fluid way rather than consider each to be directly attacking where the other one has gone before, think about how each would try to 'flow' into a new opportunity. Im not criticising your thinking, im just trying to find common ground between us.
I see what you're saying, and again I agree. The difference between us arise, I think, from how I read your original post to be examining primarily gaming, where it seems you meant to expand the scope more than I had thought you did. My responses were drafted accordingly. I do still think that the gaming market is far and away the most important aspect to consider though, since I strongly believe that Microsoft and Sony are not yet able to realize their ultimate goal, so gaining more traction with gamers (i.e. the folks most likely to be comfortable with using expensive technology for entertainment purposes) is the most important thing either of them can do this generation (Nintendo is omitted because they do not have that same goal).
What of the Sky service? Direct downloads? Twitter/Facebook? Also think to the audience, they were selling the Xbox 360 platform as it exists to their current market. They only showed technologies and concepts which they thought applied to their E3 audience. They learnt that harsh lesson last year with You're in the movies etc. They did not even try to show off something like 100 vs 1 which is closest to Nintendos realm in both execution and market dynamics, and that is closer to release than most of the games they showed. Even Nintendo finds that the audience they show to at E3 are different from the audience that buys their games, they get criticised for it.
I believe that all of the services you speak of are there not for the goal of gaming (let alone the expanded audience), but to make the console a media hub. Since I read your post to be about the impact these new moves will have on gaming, I framed my response accordingly (and for the record, I don't for a second believe those features will help Microsoft's gaming business, which is fine since that's not the real point). I think You're In The Movies did in fact belong at E3, since it is as much of a game as Wii Fit is (which is to say "it is," fools be damned), and I think they were ill-served by omitting 1 vs. 100, but then all three companies make dumb decisions at E3 (it's like a rite of passage). I also feel there's a bit of a contradiction here, since they showed off Natal at E3, but Natal is not intended primarily for gaming, but perhaps they just felt that they should scale back how much of that type of thing they showed off. In any case, it certainly won them buzz, which is quite helpful if they can sustain it.
I feel that I have lost Tim, I hope to get Tim back one day as Tim is my hero. 
Come now, all's well. Even the best of friends don't always see eye-to-eye, but I feel that having these discussions with friends is much more enjoyable than having them with strangers. Don't you agree?
In any case, I think we're mostly on the same wavelength, save for the matter of what impact Natal and Sony's wand will have on the gaming industry. But if you're right, and Natal is meant for bigger things, I don't think that much matters. It'll be interesting to see where the three companies go from here.
