Microsoft would have been better off to leave it to the 720 just as Nintendo didn't release the Wii Remote for GameCube.

Wii won't be overtaken by the 360 simply because the Wii has the mass market mindshare. It also has the mass market software. Unless Microsoft bundle Natal with a really good game and have support from the start it won't take off at all.

Microsoft have left themselves open for attack by showing their cards so early.. They're on the right track but I think they need more focus.

You are right... mindshare = marketshare... Wii has that Mindshare and it would be a task of monumental proportions for Microsoft to completely reverse that trend. They would need to start by marketing Natal as if it was Halo 4... which would be a good pack in game.