If it doesn't make a profit, then it isn't commercially viable. Microsoft wouldn't purposely release a product that isn't ready for the market. And no one knows if this will even become a product. You may think it's a good idea to include technology like IllumiRoom with the next Xbox but I think it's unlikely.
I disagree again. Kinect came out late, but there is no evidence that something like a low resolution projector would come out that late. The Kinect SKU made money on it's own. So, it still does not make sense. This is a visual thing with the assist of Kinect so I fail to see how it has to sell with the console.
There have been many changes over at the Xbox group from when the 360 came out and technology has changed over time.
And here's why: Firstly, it requires a Kinect and a projector. Microsoft would need to do a lot to entice customers into buying a projector in addition to a Kinect.
Secondly, would developers have to make their games IllumiRoom-compatible? If so, then that would further complicate things.
Thirdly, the concept is very cool but it isn't practical. Not everyone has a huge wall just waiting to have something projected onto it. And not everyone has the privacy to turn the lights off during the day. What about people with pets? Just imagine how crazy cats would react to fast or slow-moving lights. If you don't know what I mean, then search "cat laser" on YouTube.
Finally, consider all of those things and tell me if you still think it would do well in the market. TheLegendOfMart made a good point about the Kinect being used mostly for casual games. Would a hardcore gamer really want to spend money on Kinect and a projector for what is, arguably, a gimmicky feature?