I haven't had much experience with XNA itself, but I feel a major problem with the whole thing would be low consumer attention to the service. There can be any number of perfectly valid reasons for this - a game lacks achievements, it is slightly off-putting to pay for an amateur project, its largely niche, the amounts required are too random - but I think a major problem would be a percieved lack of quality - the existence of things like Break One Out only help to reinforce this idea that this is just people making gimmicks rather than games, and bad ones at that.
Ironically, a service that allows an entry for everyone will fail because everyones a tosser (this is the defining philosophy behind 4chan). LittleBigPlanet would have choked to death within a month without a rating system, since no-one would be able to tell what was good or not (except for the 1% that make headlines for being weird - I didn't say good or bad, I said weird). Same thing applies here.
Anyway, thats my opinion. I'mprobably grossly innacurate, but thats just my pserspective.
