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daroamer said:

Except for all the people who actually played with Milo at last year's E3? 

http://kotaku.com/5275204/testing-molyneuxs-milo-a-virtual-boy-with-yes-a-dog

It wasn't fake but perhaps it just never ended up being a good, you know, game.

Did you actually read that article?

It pretty much says that the guy from kotaku stood in front of the TV and said some nice things, which Milo reacted to by smiling, and the whole thing was controlled by a Microsoft developer who was in the room as well.

So the "real" Milo was never even remotely as advanced as people thought when seeing the Milo trailer. It was only a scripted trailer, and that's why people consider it as "fake".