Certainly there is a pricing issue and once that goes down expect it to pick up pretty decently in Europe, but I would think that the biggest issue for Kinect in Europe is the language barrier as it only launched with English, Japanese and Mexican [Spanish] support and I am unsure as to whether further language support has been added yet.
As far as space is concerned there should be absolutely no problem, if kinect is perfectly usable in most UK houses then it should be usable in most houses in the entire first world as these articles state
http://news.bbc.co.uk/1/hi/8201900.stm
http://www.stat.go.jp/english/index/official/207.htm (go to section 7.4 > contents)
yes the average floorspace of a UK home (76m2) is smaller than that of the average Japanese home (94.85m2)
