Project Natal includes both a 2D RGB camera as well as a 3D time-of-flight camera. This is what makes it so amazing for something that is expected to cost around $200 (not much more than a Guitar Hero set). From your post it sounds like
you don't believe that this is the case (that it is a true 3D camera where each pixel contains the true depth at that point). This fact has been pretty much confirmed. This is not a bad place to start:
Also, I realize that for the grayscale depth image returned by the 3D camera, it is computationally easy to find edges. But this is not the only thing Natal does. It maps that info into multiple skeletal points, and that is where the heavy processing is.
What I was proposing was that if that part of the processing is what is really causing the lag, that using additional, simpler 2D/3D overlay tracking could help to reduce lag since the software can make assumptions about how the skeleton is moving (from the
2D image) before the heavy 3D processing is able to even calculate the true position of the skeleton.
$200 seems like an awful lot though, the whole console itself starts at $200, my guess is it'll be somewhere between $100 and 200. It could even be sold at a loss initially like a new video game console.