Honestly, I think the reason it makes business sense is if Microsoft makes some deal to get increased profit from all game sales on their console from other publishers by blocking used game sales.
That, and the huge one is the cable box functionality. If it turns out to be true and they start pushing cable boxes with always online internet, and always connected/calibrated Kinect, they could revolutionize television advertising. Now companies could actually monitor the entire living room and tell if people are watching the ad, if there are couples, kids, one person, if they get up and leave the room and at what point in the commercial they leave the room, or monitor their interests, conversations and behavior in the living room for targeted advertising (food, furniture, gender targets, political affiliation, sports team affiliation, etc.). They could even make you interact with the ad with motion or voice to get it to stop, dramatically increasing the psychological impact of the ad. That ad space would sell for a lot more.
And they could just be making the bet that over the next 10 years, most people will get internet and won't care about it.
I think the whole thing revolves around the always online Kinect, and how it will be used in advertising and database collection.
It wouldn't surprise me if Microsoft barely even cares about gaming, and sees hardcore console gaming vanishing in the next decade or twenty years. They're very possibly making a play for something bigger. The future of television, living rooms, advertising, data collection, privacy.
That's why I'll never get it. I don't want a sophisticated camera with full voice recognition pointed at my living room, always connected and always calibrated. Fuck that. For all we know, they could sell that data to defense contractors, government or private. Not hard to imagine the government being interested in tapping into a network of millions of cameras around the world pointed right at your living room with voice recording and a 24 hour connection to the internet.