[citation][nom]sceen311[/nom]not sure how it'll work if obstructed behind a swinging arm though...[/citation]
That's actually a feature of the system, moving the ball out of sight of the camera is a "trigger event." It's a basic maneuver to begin a combo or special move, and has other purposes as well. It can further discern when you stand still and put it behind your back and reveal it again, and when you spin where it comes back out from the other side of you.
You're right, targeting the ball only, and not hand positions and facial recognition is important and a much simpler algorithm to process, and the colors of the ball is MUCH easier to distinguish to identify an object than using a facial recognition system. I have to imaging Natal is going to have issues with lots of kids in the same family looking near identical, especially twins... Also, movement of the ball, combined with the accelerometer positioning from the handle is extremely precise compared to detecting subtle body movements using a camera only which doesn't use 3D positioning...