Thanks for the report. I didn't realize that you would have to reinstall the drivers etc. I though it was just a matter of replacing KinEmote itself. Do you know if that was actually necessary for some reason?
I think the trick with the wave may be that you have to do a left-right movement a minimum number of times. Something like 5, (left-right-left-right-left). I can see this being useful in the future if we can have different things happen depending on whether we using a push or a wave to get it's attention. For example, push to initiate kinect scrolling, or wave to make VC listen.
There will probably be a separate overlay eventually with no video, something like the one in my demo video (but nicer) but it is unlikely that it will be an integrated part of XBMC, so you would need to run XBMC in "full screen window" mode. I personally prefer this mode anyway for other reasons, and I think it is the default mode for windows (it always seems to install that way on my machines).
I haven't tried it yet, but the main thing for me is probably the blinking light! Connecting on start is nice too. (I asked Johnny for this feature in our last chat because you had mentioned it to me, but I don't know if that's why they implemented it.)
I probably won't get a chance to try the new version myself until next week. I am going away from Wed. to Saturday this week, and have a lot to do tomorrow. Sadly, this probably means that I won't release the next version of VC until I get back