My confidence is this add-on success has dropped consistently to say the least.
It tells us what some of the devs are thinking. I actually think the potential is still there and getting more concrete each day. The same would hold true for Natal.
For something like the RE5 demo, it should be like this:
Player 1: DS3. Able to shoot and move freely at the same time.
Player 2: Motion controller. Move together with P1 automatically (No movement controls). Handles light source or sidearms. The light source may start with a flickering candle, to unreliable torch light, to flaming torch that can double as a weapon (or even light a dynamite for throwing -- with 2 motion controllers).
I can see the above setup work for my family where I am P1 and wife/girlfriend/children are P2 and beyond. It doesn't have to stop at 2 players. It will also showcase the controllers' strength independently. If there is only 1 player, make the game on-rail automatically.
The added advantage here is it allows a core gamer to bring in the casual gamers around him/her and be a hero. ^_^
For delivery mechanism, I would rename the current PSN game category "PS Eye" to a new one (like "PS Eye + PS Hand" ha ha). Make a bunch of SP on-rail games and co-op mixed controller games. Since the experiences are more condensed (no lull period, and no aimless wandering), I think it should be fun and intense for instant gratification, and for all ages.
EDIT: The LBP designers got it right, IMHO. Although it would be more balance and fun to use 2 motion controllers (or 2 DS3s) in that game.
If the nunchuck is really necessary, wait for DS3 stock to deplete and then make a break-apart or transformer controller.