I can't believe it. This looks so explosively awesome. I love the 'Fighting figures' idea. I want gladiators on my dinner table fighting for me. I really have so many ideas of how awesome thus could be I'm bursting at the seams.
One of the (Read: My only) concerns I have is that medieval thing; Vehicular manslaughter, anyone? Or would, if they're made, the glasses for AR allow you to see a horseback rider or something? And it would seem kind of weird to you to, before glasses, be running around town seeing something no one else does and, let's say, hitting a skeleton monster that's air? Surely everyone's AR is a different sight, right? Ah, whatever.
And to solve your AR glasses problem, I'm sure a I-touch/Droid/whatever else holding helmet could be made, no? That would keep both hands free.