Just as an observation, in the live demos they were doing in the Macy's windows in NYC a week or two ago there was only about 3-4 feet of width and roughly 6-7 feet of open space in front of the Kinect. I would say the demoer was roughly about 5' away, and had just enough room to swing her arms. That's a much better representation of a living room than most stage demos, and the Kinect was still picking up all her movements just fine.
"Here comes Mr. Bill's dog." -- Narrator, Saturday Night Live