When I saw the "fighting" demo for Natal I thought to myself - sorry that's just marketing. We as normal geek sloths will never be able to do a 12 phase combo.
I can see Natal working very well with certain applications maybe with less dexterous style sport actions such as baseball or tennis (say, much better than the Wii style, "I will now just use wrist flick actions since it is much more efficient and accurate").
I can't see Natal working well with fighting games or driving games. For driving games you need that tactile feel of a steering wheel in your hand. Holding your hands around an imaginary well and flicking an invisible gear shift? Nope! not I.
So yes, Natal will be great with certain applications and no doubt the imaginations of game designers will allow it to be used for things that I probably can't imagine. However, it is a niche style for controlling. The good old game pad is probably the most versatile design ever for games in general. It is the most adaptable.
Don't get me wrong, Natal will shine where it is applicable but it is in no way a complete replacement for the game controller.
I see the wand style motion controllers as more evolutionary and more versatile (not as versatile as a traditional game controller). I see Natal as a niche and if they (MS) continue to market it as being able to replace a traditional game controller for games like Tekken, DOA, or SFIV, then MS is sadly mistaken.
I like to be able to think I can see paradigm shifts happening in action but Natal is not going to suddenly endow me with the dexterity of Bruce Lee. The line between controller and person will forever be ridged.
I suspect movements will be simplified. Do you honestly thinl MS has not thought about this?