It looked like an interesting project but I've read on few websites that P. Milo is rumoured to have been cancelled. I know that some people here were interested in Milo but I guess the technology is not there yet for such project:

"According to an unnamed source close to the project, the development of Project Milo officially halted yesterday with some nineteen contractors losing their job because of the projects cancellation. The team will now reportedly focus on the Fable franchise, with the old Milo team now using the Milo tech for a new "Fable themed Kinect game".

When asked to comment about the rumor, a rep from Microsoft and Lionhead simply responded with the good ole, "Microsoft does not comment on rumour or speculation."

Link:

http://www.qj.net/qjnet/xbox-360/rumor-project-milo-canned.html

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that doesn't sound so much canned as much as moved to leverage the popularity of an existing IP.

so again I can't play with a 12 year old boy... how disappointing...

I thought that was just a tech demo. Was it actually intended to be a game?

That's what I thought too.

I assumed that as well but some people really had their hearts set on a "Kate and Milo" game coming out eventually, even counting it in list wars.

looks like it was posted already.  locked.

The most likely way to build a system similar to the one demonstrated with Milo would be to just create a heavily scripted system with tons of possibilities that reacted based on voice communication; essentially, consider a conversation system that had a conversation tree which was much broader and deeper than Mass Effect 2 (resulting in 4 or 10 times as many conversation elements) where each conversation elements has the level of detail that is reserved to a very small portion of Mass Effect 2's conversation elements.

While this isn't that technically demanding, it would require several times as much content at a much higher detail resulting in a much larger expense; and since most people are not going to come close to exhausting the conversations most of this content would be missed.

You could easily build a system like this for a 5 minute demo but it is unreasonable to expect that anyone would be able to produce a system like this for a whole game at this point in time.