I have seen rooms that react based on where you look. TV's turn off when nobody is looking at them. Billboards that will count how many times people look at the and charge customers accordingly.
Different technology, but similar and cool
EDIT:
This tech he's working on can be melded with the tv/billboard IR tech by simply tracking where the eyes of the player are from the red eye effect, multiple people in the roomhowever may cause some problems which I suppose can be fixed by distance and position compared to the player wiimote.
I would also like to see something similar to what I have only seen in some psycology experiments that track the eye of subjects to see what items of a video they are looking at (autistic research comes to mind). With this the optical focus of the picture can reflect the player focus on the screen.
This focus is the main problem I see in current video games, I only recently quantified my "miniature world" illusion of video games due to the fact far away objects keep the same focus as near objects, most noteably in football games. The only way this would be replicated is if the stadium is very small and the difference in focus over the range of sight is miniscule.
Both technologies together would be absolutely amazing and, in my opionion, revolutionize the gaming industry more than the wii originally intended to do with the motion sensing controller.
EDIT 2:
Some links to the IR tech
http://www.engadget.com/2007/05/09/googles-eyebox-counts-eyes-in-public/
cant find the TV or other room gadgets, was in an old popular science magazine