Earlier this year, production company Roger were brought in by Microsoft to create an animated short for the company's E3 press conference, focusing on avatars. It was, apparently due to "time restraints", never shown.
The clip shows avatars freed from their dashboard confines, and parading around doing all kinds of things, from hanging out to playing games to romancing to high-fiving. The bits where they're inside games look interesting, especially with the obvious Gears of War, Rock Band/Guitar Hero and Splinter Cell overtones.
Now, this doesn't suggest that avatars can/could become playable within those games. It might just be using the little guys as Microsoft representatives. And hey, maybe that's another reason the video made the cutting room floor, Microsoft not wanting people to get all confused and expect to be able to use their avatar in the next Splinter Cell game.
Whatever, we don't know. It's just an interesting possibility. All we want to know is, what the hell is that Dreamcast controller doing in there?