If a source close to Lionhead Studios has it right, then you'll have to find a real little boy to squash snails with instead of Milo and Kate's digital little kid. The Kinect research and development project headed up by visionary designer Peter Molyneux has purportedly been scrapped, according to a Eurogamer report, and as a sad result, 19 contractors have possibly been let go from the Guildford, UK-based studio.
The same source believes that the tech birthed from the Milo project won't go to waste. Instead, it will be used in an unannounced "Fable-themed Kinect game," the source has said.
Milo and Kate (or Project Milo, if you'd like) first appeared at E3 2009. Doubts that the project would ever become a real game followed the presentation, because, frankly, the child-interaction project seemingly didn't have the framework of an actual game. Microsoft and Lionhead launched something of a mini-PR campaign rather recently this June, confirming that the title (or project, or demo, or whatever) was still in development, though was not in fact guaranteed to become a real game.
Milo later made a splash at TEDGlobal in July in its first public appearance since E3 2009. Molyneux wooed the audience with a similar multi-environment demo that teased the fact that Milo's AI had some sort of ability to learn and adapt based on the player's interactions with him. Crushing snails, for example, would make Milo feel sad, but I suppose he'd get used to it if we made him do it enough. Unfortunate as it is, it appears as if we won't get the chance to see just how far we could push him down that dark, dark road.