I think it's really quite simple.
Step one:
Unflexible (in opinion, not physically) gamers need to throw out preconceptions and might need to let go of the completely controller free concept and not be disappointed if controller use does in fact become implemented for certain game styles.
Step two:
For most cases, movement would be controlled using a thumbstick on a controller. Maybe MS could even release a "standard" controller that can break in half to make it easy to hold in one hand. I suppose even both halves could be held one in each hand to gain some more controls...but first let's explore some game ideas.
Let's say that the concept isn't all about run and gun but maybe more centered around duck and cover, time crisis (or if anyone remembers N64's Winback) style shooting...environmental awareness would be key and using cover strategically.
Here's where it could get interesting. You run from cover to cover with the thumb stick and press the bumper to engage cover mode...from here, you would have to physically duck, sidestep, lean, and aim while engaged with enemies in one on one, or one on many situations.
If we were to use a seperating controller, then the part held in the right hand (of course this can be switched if you prefer the left hand) could act as a trigger, this serves as making up for Kinect's fine movement weakness and providing a tactile trigger to use, killing two issues. It could also serve as a point of contrast so that the Kinect cameras can more easily recognize where your shooting hand is in space, hopefully increasing accuracy. Hopefully relatively small movements rotationally will keep you from needing to turn at too far an angle to effectively see the screen your using. Instead of lamenting that the Kinect is now not completely controller free...we could rejoice that it is now much more versatile than originally intended.
Instead of complaining about a system's weaknesses, we would be overcoming it and in the proper dev's hands, even this admittedly lame idea could show some great potential.
What makes me sad, having been a gamer since i was 2 years old, playing Pac-Man and Arkanoid in a local donut shop is two main things. Video games are supposed to be a creative medium and it seems that it's really gotten far from it. Everything is the same but with a higher number at the end of the title and an extra feature or two. It's like we're all playing the exact same game as we were 10 years ago but with more "shiny". The second is the way we divide games now into "hardcore" and "casual" which is utter tripe...why not just seperate them into "fun" and "not fun"? I understand that that could result in a lot of subjectivity but what's wrong with that?
I also would love to see RTS's using Kinect, i think it would be the best way for a console to adopt the genre.
And sorry for reviving an old thread but I'm astounded that this community out of any wouldn't come up with an idea better then "just give me the same-old same-old".