Another interesting thing about this is how obese/inactive people will be able to play fighting games (virtua fighter, street fighter, etc). Microsoft is essentially going to force people to get in shape to play their games. I would imagine those people are a hefty part of their market share (pun intended).
I would assume that they’ll continue to allow people to use wireless controllers (if not, puzzle games with timers are going to disappear [can you imagine trying to move/twist/turn/swap objects in a puzzle game like Tetris?]).

It’s interesting to see how game systems are evolving, but ultimately I don’t see the ‘typical’ controller being removed anytime soon.