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HappySqurriel said:
With that said, if I was Microsoft I wouldn't put too much emphasis on Kinect. Kinect did well at taking away some of the Wii's momentium and selling the XBox 360 to a different demographic but it has really had fairly mediocre reviews from owners and I suspect people will be much more gun-shy about buying into a system that focuses heavily on that.

Sony never catches much flak for overpromising and underdelivering.  Toy Story graphics on PS2....really?  PS3 with 2 hdmi ports etc.  Xbox owners got on board with 360 after the Xbox was killed quickly and prematurely not the mention the RRoD thing.  I don't think and underdelivering on thier motion controller will hinder that much.  

Increased resolution is exactly what would make the kinect a worthwhile experience for more than workout and dance games.  It would allow for very quick simple natural gestures with just your hand.  In short it would create the possiblity of more arcade like gameplay which is what the wii has and kinect doesn't.  In addition it will also make general computing, menu navigation and media consumption easier and more intuitive as well.  Doing it wrong was obviously profitable for them. I can't see how doing it right would be anything less.