Please, please, please, for the love of all that is holy in gaming, don't make an "innovative" controller. Just give us a better system, with better specs and larger games (not just better graphics either) because, myself personally, cannot stand the Kinect functionality, and just want to sit down and play a great game, not a generic game with crappy gimmicks. As others have mentioned above as well:
-Make it sexier (I enjoy the black and green color scheme, so maybe keep that, just trim the size and make it shiny to my eyeballs.)
-At least 300 gigs of space on the crappiest model. Maybe even 500 gigs at release. This space is just ate away when installing games onto the hard drive.
-Keep the controller mostly the same, though the D-Pad needs some changes for fighting games.
-NO RROD'S PLAGUING THE LAUNCH. Please, don't do it. You don't have to rush the console out for the holiday season. You saw what that did to the Fail-U.