I would say that it is tragic blunder, because this game had the potential to expand their product even beyond the casual market. To markets the Wii wasn't even able to touch. Microsoft could have started brand penetrating at the toddler level, and boosted their image by having hardware that could be the gold standard for educational hardware. Further more it just doesn't seem to be logical. Surely the tech demo could have just been kept bare, and made into a digital download. This was the only game that interested me for my console, and it wasn't even for me. I wanted to have a cool toy for my young relatives to play with when they came to visit.

You are correct.  I just read an article about this very thing.

HAHAHAHAHAHAAHAHAHAHAHAHAHAHAHAHAHAHA

looks like they realised what they promised was too much to offer

anyways why was MILO and KATE still at E3 then

the game had potential but the AI needed was just too much

no as EYEPET,NINTENDOGS is what KINECTIMALS is like

MILO is where you interact and where a far higher AI is needed

Wow wtf!!!? :S CGi is gonna be bummed about this

Milo itself wasn't even remotely interesting to me, but the concept of using that tech beyond simply chatting to a boy was. As Reasonable mentioned, some sort of adventure game.

It was always a bit of a trick though, they displayed the game as if it were totally unscripted to hype the tech, when in fact it was.

Milo tech 'went into Kinectimals' - MS

http://www.computerandvideogames.com/article.php?id=253739

It doesn't specify if the tech went, but definitely research and lessons were passed on by Petey.

This is a huge disappointment. Milo was our killer app.

The point is that for Milo Kinect promised advanced AI interactions, where in Kinectimals you have an HD version of Nintendogs, which is actually less advanced than the DS title.