During a Tokyo Game Show interview (look for the full transcript soon), Spencer told Joystiq that the innovation fostered inside Lionhead Studios made it a good match for Microsoft's forthcoming motion control system. "You know, Lionhead's been a real innovation studio for us," he said. "We have the release of Fable 2 episodic this week, where they're taking Fable 2 and breaking it up into chunks, allowing people to buy the content at their pace. Fable 2, I thought, was a great release, with the orbs they added with Live, adding new functionality to the franchise. It wouldn't surprise me in the least if Natal found its way into future iterations of Fable."
Whether or not motion functionality will show up in 2010's Fable 3 is a matter of speculation, though your role as king in that game would certainly lend itself to some interesting ... regal maneuvers. Waving your hand to permanently dispense with an annoying peasant? That's our kind of role playing.