i wanna play games without dancing infront of my tv.

no thanks to Wii, NATAL, and PsEye

I'll say failure for showing it off way to prematurely. Not even an actual game to showoff, and no real details given, it probably will be their main thing next E3, when it should have been shown off in the first place.

I'll say fab tech but could yet fail.
They need a truly compelling piece of software to have any chance of a Wii Fit style success. And I don't think they'll get that success with an exercise game. If they develop that Milo tech into a full game, that could be the compelling game that differentiates Natal from the whole Wii thing and helps it become a success.

Showing this was more for devs.  Pete was definitely given the task to make a case to developers.

Developpers aren't going to learn much from this conference,

Well, they want to make them interested in supporting the hardware.  Learning will come from the dev kits and the API that M$ provides.  Pete made a pretty good case for people looking to innovate interative experiences.  He may have convinced someone to make something.  And that was probably what that was all about.

It's awesome tech and stuff but please someone tell me please WHY OH WHY they had to use animated avatars when chatting online with a friend instead of using that freaking camera for a real video conference ? WTF ? People ain't cool anymore ? We gotta use avatars instead of people ?

It looked to me like her friend was real not an avatar.

Mhmm, I think I can see that, but it seems kinda strange to announce something "superior" to your own current product, and not even realease it till at last a year later. It's like if Sony announced the PSP Go tomorrow, and said "on shelves 2010". Would you want to buy a PSP-3000? Maybe not. It's not as drastic like that, but it's what stood out to be. Perhaps even they thought it can stall future potential Wii owners, that could be the case too.

The thing obviously needs work, so a 2010 release is necessary.  The skeletal responses on the avatars went wonky for a little bit during the demonstration.  This is a reason why the Wii Avatars have floating apendages insteard of a real skeletal system.  I am interested to see if they perfect that.  Because that would be neat.  I was impressed with how well the avatars were mimicking the people's stances when the skeletal system wasn't on the fritz.  Looked like a very nice 1:1 mapping.  Not just in X and Y either.