I'm betting on a Kinectless bundle around Christmas.

Ahh, I see.  A Kinectless bundle is very possible though I feel that MS is still too stubborn to admit its lack of practicality. Also, much of the functionality of the X1 is dependent on the Kinect so MS needs to release a major update in order to fix that.

I am a bit ignorant about the excat functionality of the Kinect and a little confused about what functionality is handled by the microphone (audio recognition) or the Kinect. Could you enlighten me about what exactly will be missing without the Kinect?

If you unplug the Kinect, the X1 will constantly have the message "Kinect is unplugged" on the upper right corner. It'll only temporarily disappear when you play games. It is easier to snap apps and record gameplay with the Kinect than through the controller, especially when you record gameplay.

So basically, other than the Kinect based games, and the kind of supercificial futuristic feel of a next-gen console, Kinect is non-essential, and can easily be unbundled without much recess of the console's functionality. On Microsoft's behalf, this is either some sort of a gimmick or half-baked iteration (due to heavy MS bureaucracy) to differentiate from the previous generation and the competition. Otherwise, we would see a lot more focus on Kinect so far. The point here is though, if MS unbundles the kinect,

a) There will be repercussions from the early adopters and degradation on Xbox's brand name

b) There will be hardly anything to distinguish it from PS4

c) There will be absolutely nothing to justify the price premium, therefore it will have to be priced at $399 or below

d) Dropping kinect and price means the admission of defeat, which has highly negative reverbarations...

So in the short term, this is a definite blow to Microsoft and Xbox. In the long run, however, people are forgetful and forgiving. If unbundling Kinect makes a lower price possible, then it will definitely benefit the XB1 sales in the long run provided it's price significantly lower than PS4 (by $50-$100). This will ensure close competition in English speaking countries. There isn't much MS can do elsewhere, regardless.

And also the sooner the better for dropping the Kinect, it may be too late otherwise.

I guess this is about the concept of "overly". For me, it means too optimistic. If it still bothers you, pretend i only said optimistic. What i mean is that i consider the numbers to be above what i would expect the systems to sell.