Actually, I'm going to have to say that the real reason why the PSEye never really went anywhere had a lot more to do with dropped software support rather than inherent flaws in the hardware itself.
I actually enjoyed all of the PSEye games back in late 2007 through about 2008, after which there were essentially no more PSN games that exclusively relied upon the Eye.
If you look at the list of PSN games currently that require the peripheral, the list has remained very short.
Added to that was the fact that almost all of the games were PSN games (Eye of Judgement and Eye Pet are the only exceptions I know of), many of which were nothing more than motion tracking interactive screen savers, and those that weren't, we're very simple games. About the only game I played that actually made impresive use of the PSEye was Eye of Judgement. Eye Pet looked like a pretty clever application as well, but not something I'd play.
Ultimately the real success of Kinect will depend upon the software support. Not just how many developers are making titles that use the peripheral, but just how good those titles are in reality as well as how much the interface improves the game experience. If it's just a bunch of jumping around, ducking and bobbing, then I see little to get excited about as someone who primarily enjoys core games.
Beyond that, whether the tech actually works as hyped is really only secondary.










