...not sure what I feel about this... At this point, Microsoft definitely is in a better position to appeal to the 'casual' gamer market, and clearly the Miis are doing it quite well. However, these 'Avatars' look like they're more meant for regular gamers to make a consistent character for different games. Maybe you can toss them into shooters, racers, and other types of games?
I think it's an interesting tactic by MS, though--together with the Newton, I'd say they have a fair chance, if they market it properly, to appeal to the crowd that's intrigued by the Wii concept but wants more up-to-date graphics?