Bah, was discussing this earlier. Sure, it has great potential, but I have a feeling Microsoft will totally screw it up.
Some problems about this are the fact that ~60% of Xbox players are too lazy/unhealthy to stand up and actually move around, and the marketing for this product will be odd, because they will have to focus on a new group of people to sell to.
It looks cool, it could fail, but who knows, it could be great.