They do have Live Arcade Unplugged.  i have seen a couple volumes of these around.  as for a controller, i know that i havent had any issues with games ive played or tried, so they likely just felt it unnecessary.

"I know it's a little more then that (e.g. Wiimote) "

That's is the essential sentence. Nothing more to say about that.

And by the way. Nintendo has Wiiware, with much more high quality games for casuals.

They're so focused on making XBLA a casual-friendly service with "pick up and play appeal" (I can't even count how many times I've heard that line from MS), but they don't promote it worth a shit. The casuals will never know about XBLA, let alone which games are on the service, and most of the hardcores riot every time a game like Coffeetime Crosswords sees release. Not really sure if they know what they're doing with XBLA at all.

My guess is Microsoft is used to having a captive audience on account of Windows, etc. and not having to really market their products and services to the general consumer.

True but unnecessay it is not.  The first thing my girlfriend thought was the standard controller had too many buttons... I had to show her how to play Hexic.  The game basically uses two buttons, each botton rotates the object at a different direction. She wouldn't even use the "reverse" button, she was happy with one button LOL :)  Now if there was a very simple controller included with the Live Arcade Unplugged pack then I think it would have a bigger impact.  That and the name needs to change... we all know what unplugged means but I don't think everyone "gets it".  Perhaps something like "Family Game Pack" or "Family Games"