Microsoft tried something novel at a recent event in Hong Kong; they figured if you use a pair of scantily-clad booth babes to demo a Kinect game, maybe people won't notice the game not working.
Things begin well enough; the waves to the crowd are twitchy, but recognised. Then the race starts. And things start to go wrong.
Sure, they're standing too close to each other (which would confuse Kinect's sensors), and are told how to fix it. But there are large stretches during the race where one of the runners isn't being recognised and there's no warning or prompt on how to fix things. Worse, the game isn't pausing when an error like this is encountered; it merely carries on, the victim of a technical glitch left to eat the winner's dust.
We're three months out from Kinect's launch. It's too late to make drastic changes to the hardware, but the problems in this case are game-related, so hopefully they're just the kind of things that can be fixed before the accessory's release.
UPDATE - As a few readers point out, Kinect does also not appear to enjoy barrages of flash photography, which may well have been just as big a cause of the problems, and one you're far less likely to run into in your living room.