I am working in a lab that is developing a similar technology, the main difference being we use a single muscle site to control two degrees of freedom (primarily moving a cursor on a screen). We are also working on applications for severely paralyzed individuals who can use the "ear wiggling" muscles (auricularis superior--the side of your head) to control anything from a television remote to a motorized wheelchair. The control isn't perfect, but with a few hours of training most participants are achieving cursor-to-target accuracies of around 80%. One participant was able to reach 100% in one session.

It is fun to play with a muscle-computer interface for a while, but I don't think it will catch on as a heavy-use gaming controller unless they significantly improve upon current technology. It is simply too imprecise, though on/off (button) control like what is used for Guitar Hero is better suited for it than x,y movement of a cursor. Trying to control the equivalent actions of what you can do with a PS3 controller is out of the question.