It doesn't look that much like a dildo.
And I'm going to have to agree with Brotherofwill. Why is everyone getting so worked up over the name? I'm more concerned with the fact that this just looks to me like a Wii-mote. It's like a ps3-mote. At least Microsoft's thing is adding something to the technology. I've always liked Sony and the Playstation consoles, but I'm not convinced that jumping on the motion bandwagon in this way is the way to go. I like the Wii, but it was kind of a curve ball that managed to work. I'm not sure that the same kinds of games, but on another system will help all that much. And god, imagine the learning curve Natal is going to have for programmers. Microsoft will probably manage to create some really good stuff for it, but developers might be shrugging their shoulders for a while.
I guess time will tell for all this.