Xbox360's strength is Xbox Live! And thankfully, Microsoft seems to recognize this. They are WAY out in front of Sony's online attempts and Nintendo's non-existent online presence, but it's starting to look as though the Xbox is just turning into a Media PC while the actual Windows Media Centre is basically dying a slow death.
The bulk of the games are the same stuff that has made Xbox360 successful, so I can't blame them at all there. But they obviously did the same thing as Sony when they looked over at Nintendo raking in the cash and said, "hmmm...wethinks we'd like us some of that!"
Project Natal is just that: a project. Were they hoping that people would see it and stop buying Wiis while they wait for this thing to come out? Or were they trying to calm all the hardcore gamers (who don't want Wiis in the first place) by telling them, "don't worry...we'll have motion controls too"? But I'll at least give them credit for coming at it from a different angle and NOT introducing a "wand".
The "Milo" video was a scripted farce - so don't worry about Skynet Milo any time soon. As to the voice commands and facial recognition? Yeah...good luck with that. We'll have reliable Blu-ray quality 1080p streaming before that stuff works! Watch in amazement as you scream repeatedly at your television, waving your arms frantically and then get booted out of your account because your face turned red and the facial recognition freaked out! Joy
What's funny is how everyone always thinks that "Minority Report" controls would be cool - until you actually think about it a realize that everything can be done faster and far more precisely with a mouse! Waving your arms and talking to control things seems wonderful until you scroll past things you want because the motion sensing is laggy and imprecise, the voice control fails to recognize commands and you get Gorilla Arm from trying to hold your arms in the air all the time to drive your invisible, intangible car steering wheel!
So go ahead and throw Natal into the Xbox720. Everyone will get a kick out of it for 24 hours and then go back to regular control, but it will certainly help to sell consoles and make for some great looking ads.