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"There's still a question mark over the technology's noticeable input lag -- Kudo Tsunoda assured us that the final product would aim for a more acceptable latency of 100ms -- but quick reflexes aren't really required to enjoy a game like Space Invaders casually"

http://www.joystiq.com/2009/09/25/tgs-2009-body-on-project-natal-with-space-invaders-extreme/

Looks like the input lag will at least be better before release.