If they're that serious, why not do the obvious thing and provide a physical switch? Why make it dependent on code we all know is fallible?

Well, what does a switch do? How does a physical switch work? Phones -- the old ones -- have big honking mechanical switches, but you can still listen through the things, with a little engineering.

A switch that just twiddles a bit on an input line can be ignored by software.

A switch that controls power might be interesting. But then there's a cable from the camera to the console itself, which could carry some power, and might be used to run a microphone, or maybe the camera electronics, a little bit.

Really, your recourse is to unplug the camera. Or not have one.

Others have pointed out that there are microphones on laptops and tablets (that appear to be off, but who knows?), and many celebrated cases in which reverse-spyware has been used to recover stolen hardware.

This stuff is all around us now. There's no coordinated plan for NSA-like folks to glue it together, or light it up without us knowing, and I think this would be hard, at least for the time being, and doubly hard to do without someone noticing.

The "switch" in a telephone was never designed as a privacy mechanism, and the device itself necessarily requires a live connection to the telephone network at all times.

By contrast, there is no compelling reason the Kinect component(s) must be connected to the xbox when not in use.

I obviously don't know what sort of bus is being used internally, but if it were, for example, USB, then the mechanical switch could easily behave as the equivalent of removing a USB connector from a socket.

The laptop/microphone argument is a red herring. "Everybody else is doing it" is not a valid excuse for doing the wrong thing.

My point is that putting trust in a switch is a surprisingly deep subject. For instance, it's hard (and expensive) to mechanically switch high speed USB while retaining the proper electrical characteristics needed by the transmission lines.

That seems an extremely odd statement to make, but let's assume it's true: Then just make it an easily-accessible cable. Or leave it as an optional accessory, which is what everyone would have preferred in the first place.

Don't get stuck in the mode of thinking you must design the solution to fit arbitrary requirements already decided upon. Those requirements aren't merely the source of the problem, they are the problem, and they're causing Microsoft to deliberately put its customers at risk.