To play devil's advocate, they can already turn on your cell phone's mic and listen (supposedly they have to get a warrant first), and kinect's uploading habits aren't hardware - and there are firmware/software/os patches ALL the time on microsoft console systems that can change that behavior.
Exactly.
If they want to see inside your house they will have to get a warrant with your name on it, whether its through the kinect, cell phone, or a cable guy coming to "upgrade" your cable box.
If they have reason to spy on you, it doesn't matter if you have a kinect or not, they'll be able to do it.
They will not be able to get video or images of you from Microsoft that you didn't explicitly upload to Microsoft. They will not be able to get a live stream of any sort, until you start live streaming to Microsoft.
That's where the 1979 Supreme Court decision ends. They can only get information from the company which is owned by the company and does not breach a reasonable expectation of privacy.
They ruled that phone numbers dialed, time of calling, and duration are not private, and are owned by the telephone company.
The content of the phone call, however, is protected, and not owned by the telephone company.
So even if you were streaming to or through Microsoft, the content should still be protected, the actual images, audio, and video.
But they might be able to convince the court that your friend list, which is publicly available, isn't private, and can be given to the Feds with a simple warrant to Microsoft.
I don't see the kinect changing that dynamic, and even if it did, again, I assert its no more invasive than a cell phone, and I see a lot of people carrying those around with less consternation than people a displaying here about the Xbox.
