The biggest problem I see with Natal is direction. I think Microsoft is trying to market it toward both the casual audience and the hardcore audience, but I can't see it being successful with either.
For the casual audience Microsoft has the advantage of being extremely approachable for people who feel out of element using a controller, but I question how large this audience could be. The only demographic I can imagine where this would apply would be the elderly. However, I doubt that an elderly person who wouldn't be interested in using a Wii Remote or one of Sony's wands to play a game would be interest in flailing their limbs around playing that box-breaking game. Another probelm I see is with Nintendo's domanance in the casual market. Nintendo has always been a company that was extremely familiy-friendly. They have that demographic hooked and as long as the Wii bundled with the Wii Remote is cheaper or the same price as a 360 along with Natal, then the family/kid-friendly demographic will almost invariably choose the Wii.
For the hardcore audience, I don't think the lack of tactile feedback is going to resonate with them. Simple as that. It also doesn't help that Nintendo has already had their version of motion control available for a while now and Sony will be entering with their PlayStation Eye / Wand combo early next year that can pretty much do anything that we've seen Natal do given that Sony develops the software for it.
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