thats the conclusion I drew 

Don't worry about PR...the numbers will speak for themselves come November. This thing is going to be huge whether you like it or not.

Well, to use sample numbers (that are not necessarily indicitive of what Kinect's numbers are), say that I know that I can have 1 million units ready on launch day. If I'm planning on 50,000 stores selling this product, I will tell a company that they can have 20 x the number of stores that I'm shipping to. (For instance, if Gamestop has 5000 stores, I would tell them that I can assure you 100,000 units on launch day.) Since Gamestop has been given this 100K guarantee, they will put up 100K for preorder; once all 100K are sold, it's sold out for release day.

This is what is probably going on. MS told retailers that they can be guaranteed to have X units at release. After a retailer sells X, they can place the order, but it will NOT be guaranteed on release day. And truthfully, for most big box retailers (Best Buy, Gamestop, etc), since they can't charge until it ships, it's actually cheaper to cut off pre-orders rather than answer the slew of questions that will come in asking where someone's "pre-ordered" item is, process the cancellations that will ensue, etc. I'd hazard this is why pre-orders are sold out.

Do you understand how production and distribution work? Or what exactly are you trying to say? That they should be able to meet all demand day one?

A multi billion dollar company with hundreds of factories, yep unless the demand is ridiculasly high(several million for day one, which obviously isn't the case), so the problem is on the supply end, either MS is with holding them or their launching it before their ready again and kinect's failrate is going to end up being similar to the 360s at launch 

Yeah but for them all to be sold out the most probable by far is that MSes X is rather low, so while they may be sold out, not that many are sold, the only other explanation is massive demand that MS is unable to keep up with, which obviously isn't the case with MSes resources and the demand for kinect being relatively small (relative to any other hardware product they produce and ship, not other companies)

If the numbers are huge that just shows how stupid people are, we haven't even seen one game work perfectly yet (we've seen a few work "well" under optimal conditions) if it does sell alot at launch the sales won't last and ebay will be flooded with them 

Retailers have already committed to buying a certain amount.  If they have more preorders than that amount then they are out.  It's a really simple concept.

The reason they can sell more later is because they can then go to the supplier and ask for more.  If they can get more, then they allow more preorders.  If they can't get more until the next scheduled shipment, then they're simply out until the next scheduled shipment.  Really easy concepts here.

So in Microsofts case, if Amazon commits to buying 300,000, Best Buy commits to 250,000, Gamestop commits to 400,000 and Wal-Mart commits to buying 350,000 (and lets just pretend that's every retailer) then they are only going to make 1.3 million or something really close to that.  They aren't going to make many more because having that extra stock sitting around costs a lot of money.

So preorders are not what companies use to guess how much to ship.  All the retailers have already committed to a certain amount of the product, preorders are there to get you to commit to the retailer and to judge how much more they need to order.

Keyword if, I doubt they have that much, and yes it is how they judge how much to ship, or rather how much they have shipped, course the closer they get to launch date the less time they have to up the amount, but again if a retailer has all the units sold to preorders that they already committed to, why wouldn't they just order more (unless they had reason to believe a large majority would cancel their preorders), so again the problem is on the supply end not the demand end unless the demand is outrageously high that the companies don't have enough room to stock more, which again isn't the case, bottom line, MS either started making them late and they will have a high failrate or is purposely holding back to make the demand appear higher then it is

How many factories does MS own? 100's? I think they actually own none ( I could be wrong). They more likely contract out their hardware work. From your post it just seems you really do not understand production and distribution and I don't have the time to make a post explaining it. Maybe someone else does. But you need to look at how companies actually get things produced. Most compaiones do not own their own factories but lease or contract factories out on an as needed basis, usually said factories are located in China.