Having been PC gaming almost exclusively for about 8 months now, I feel almost inured to this revelation by MS. Honestly, if MS had said they were going all digital, would the outrage over possibly losing used sales have been the same? Maybe. The outrage of losing retail copies, I feel, would have definitely been much greater. I think a lot of this used game discussion is happening as a result of MS having to tiptoe the line between going all digital, and keeping retailers happy.
I find it quite amusing how much I'm hearing the "I'll stick to Steam, thanks" sentiment considering that it's essentially just another DRM scheme. It highlights how little people trust MS to do the right thing when it comes to consumers. I feel that although Steam is technically DRM, and although Valve has so much control, it has overall been a great development for PC gaming. There is hardly a day that goes by where I'm not looking at the Steam store hoping for something great to go on sale. Will MS follow Steam's pricing model? Who knows. If they do, will people still be as upset as they are now? There are still a lot of questions that need to be answered.
To be completely honest, I wasn't expecting new consoles from Sony or MS at all this year. I thought that despite the old consoles getting a bit long in the tooth, they were going to wait it out one more year. I don't know if MS was caught off-guard by how well Sony's announcement was received, but this reveal definitely gave me the impression that they were running a bit behind. Perhaps that is why there have been mixed messages being sent from MS officials.
Also, regarding Kinect always being on: that's kinda hot... Time to bust out the S&M gear!