Without thinking, you hit "Continue" -- and that's where everything goes wrong. You see, the update it pulls down isn't the most recent. After updating and upon signing into Xbox Live, your newly updated system will tell you that it needs to be updated again, but here's the catch: That update will fail (see above pic). Without that update, you won't be able to sign onto Xbox Live.
Since Kinect (nor its games) isn't officially available until next week, the latest Microsoft could publicly release the Kinect Dashboard update is November 4. This means you're stuck with an early version of the new Dashboard -- without Xbox Live functionality, not to mention Kinect -- until the update becomes available in the next week or so. Hopefully you like couch co-op!
Update: Microsoft sent over this statement regarding the situation: "Due to a retailer error, a very small number of customers were shipped copies of a Kinect game ahead of launch. Since Kinect does not launch until Nov. 4 in the United States, customers who insert the game into their console before then will be temporarily unable to access Xbox LIVE. The retailer is contacting affected individuals directly to warn them of this situation."[Thanks Ken!]
