I bought my kids the Xbox 360 with Kinect a week or so before Christmas. Then, I started reading about how much space I would need. I was a little freaked out because there were a slew of stories online from people who either heard it wouldn't work in anything but a large room, or had actual trouble with it in their existing rooms. I was starting to think the thing would backfire, and I even ran out and bought a special adapter that is supposed to allow you to stand closer.
When I actually installed it, though, it worked great. My kids and I have been playing Kinect Adventures, Fruit Ninja, Just Dance 3, and the thing has been awesome. You do have to get the hang of 1) letting it calibrate, 2) staying in position when you are playing a two-player game, 3) using the menus, and 4) learning how to pause the game. But it has been pretty much everything I hoped it would be. And in 1080p - WOW.
Now, I just need to figure out what other games I should be getting.