It wasn't useless, but it was definitely under-used (and hard to make use of). In the face of emerging modern VR, it looks like it's something that MS doesn't really want to sink a lot of money in anymore.
This is sad though, because even though the current VR stuff is great, I've often caught myself thinking that something like Kinect could augment it better. For example, most VR kits involve holding some sort of controller and/or vests, sensors etc to determine body motion. This is something Kinect did pretty good, and would pair nicely in a defined space. My understanding is that the more modern Kinect was also a lot better at seeing finer movements.
So instead of a controller, how about a headset combined with an external sensor like Kinect. The headset maps your in-game motion to what you see, and the Kinect maps motion of your limbs to the in-game character. That means you would have free arm/leg movement, possibly even some hand operations etc. The big problem would be that it likely would degrade when not facing the device, but if there were kinect-like devices built into the perimeter sensors (e.g. with Vive) that would hopefully be good enough to capture the majority of motion in various orientations.