To answer the question: No not the biggest mistake in gaming history. At least not yet. Let's see what Kinect can do next gen before a final verdict is given.
Wiimote was the next big thing this gen. Kinect might be the next big thing next generation. Despite being useable in precision games it still lacks the precision that a mouse, controller, steering wheel provides. Perhaps Kinect 2 will get a huge precision boost, but I don't see it replacing hand held controls for most precision games. Unlike, say Move and Wiimotion plus whaich can replace traditional hand held controls because they are equivalent to, and in some cases superior to non-motion controllers (see Move vs DS3 for FPS games).
“The fundamental cause of the trouble is that in the modern world the stupid are cocksure while the intelligent are full of doubt.” - Bertrand Russell
"When the power of love overcomes the love of power, the world will know peace."
Jimi Hendrix
