It will all be in the software, which has yet to be demonstrated.
Lack of any killer app for Natal may well lead to an underperforming release, which is not to say that with continued support in the future that the add on could legitimately be considered a big success.
In all seriousness, about the best two apps MS could co-release with Natal (even bundle) would be Natal Sports and Natal Fit.
The question will be whether the initial Natal apps will be something that appeals to the mass consumer over the Wii (and Wii Sports and Wii Fit). If not, the 360/Natal bundle won't be any cheaper than the Wii and is very unlikely to steal a lot of sales away from the mass market demographic that are buying the Wii (to include retirees, moms, nuclear families, tween girls, etc.) as it already has established mass market appeal.
It's certainly not going to be the core demographic that buys into Natal as the future of gaming, barring the big MS/Xbox fans who will naturally buy into the MS hype before even having played the games. I'm sure MS has already come to the conclusion that focusing on the core demographic for Natal is not the best road to its success.
Wait until E3 2010 is all I have to say.