I wouldn't really trust such a prototype demo as Sony was giving as there's a lot of smoke and mirrors that can go on there - Remember Killzone 2's first appearance? Or PS2 claims to Toy Story graphical quality? Even MS Natal's demo wasn't as 'real' as it appeared.
Until people get hands-on with an actual game with Sony's wand controller we won't know how good it actually works. Regardless, unless Sony starts including a Wand & eyetoy with every PS3 sold I can't see how it'll have enough of a base to ever matter.
MS had the right idea with Natal. They understood what Nintendo did and came up with their own unique solution to attract casual/non-gamers without copying Nintendo. Natal engages people's imagination to think of new exciting ways to play whereas the Wand comes off as 'been there, done that'
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