The main mistake that microsoft did was releasing the kinect so early so that they didn't have that many games coming out to supplement the kinect. The kinect definitely CAN revolutionize gaming, the main problem is, from a developers point of view if they make a kinect based game they are bringing up their costs of development and limiting their target market further (me not having a kinect anymore because the damn ex took it in the breakup, I won't buy any kinect game until I have one because the gameplay simply won't be good enough without it even though games will be controller compatible). So it comes down to just how many incentives microsoft offers and how much support they give to get the devs working on kinect games.
On a side note, the more fire sony gets for the PSN debacle the better microsoft will look. It won't help us now, but devs are aware that there are a lot of people jumping ship to xbox and that will help them justify in their company coming out with more kinect games. Too bad we won't see that ripple come through for another few years though.