Here are some uses I have thought of:
• Entertainment – games will be more engaging and fun if they adapt to the players’ emotions.
• Parental control – with this technology parents can decide for themselves how excited/stressed/scared or otherwise their child should be feeling whilst playing games, and end the game if it goes too far, or when they think their child has had enough.
• Teaching – in edutainment the games could avoid frustration in the pupil, and in pure entertainment games, the emotional state could help determine the length and depth of tutorials at the start, and when a helpful hint of some sort may be useful to the player.    
 
Can any of you think of any other uses for this technology?

I kind of disagree with all of your points, and the subject itself.  
 

1. First off, some games are already emotionally engaging.  Games like Silent Hill, Fatal Frame, Heavy Rain, Fable... or the feeling of accomplishment you feel from any game.  Also, games are not necessarily more fun if they adapt to players emotions.  Some people don't want to feel sad, angry, scared or anything while playing a video game.  They just pick a game up to play it and have crazy fun.  Also, sometimes the developers will try to make the players feel something, but won't succeed.  For example, No Russian in Modern Warfare 2.
   
2. This sounds stupid.  If a parent thinks there are emotional aspects of a game that their child won't be able to handle, they just won't let the kid play the game.  And how exactly would the game gauge the emotion felt by the player?  Emotion is not counted by numbers, it's a subjective and personal thing.  People "feel" and react differently.
3. You don't need an emotional evaluation for games to do that.  Look at games such as Professor Layton, where if you get so frustrated during a puzzle you can just get hints by "paying a price".  And frustration is a part of learning.  If the edutainment game holds the player's hand during the whole thing, what's the point as the person ends up not learning anything?  Good edutainment games educate without the need of constant hand-holding to the player.
   

I don't completely agree with FluxWavez's points although a lot depends on just how reliable and accurate your measurements of valence and arousal are to describe someone's emotional state.  Responding to FluxWavez's points:
 

1. The fact that some games are getting there in being engaging doesn't mean they can't be more so and more talored at the same time.  If the TEDDI techology was really accessible and reliable then it sonds exactly like the kind of thing the makers of the recent ilent Hill: Shattered memories would jump at the chance of using since that whole games sonds like it was trying to gain data about the player and then use that in the game.  A less intrusive way might work evn better for their intentions.  TEDDI seems to work particularly well in determining frustration in games if I've understood things correctly and in that case there is application to the vast majority of games since it's just about making the games fun and engaging rather than engendering nuanced emotions in a player.
2. The concept of 2 sounds a little bit odd.  In theory it seems to have merit and seems to perfectly fair but if we're talking about what's going to actually happen in real life then I probably can't see it happen for all kinds of human factors and it just sounds like a scientist's pipedream.
3. It is true that there many other ways that a game can mitigate against frustration and aid enjoyment other than dynamically adapting itself to the trailer.  It's a good point that if a game is able to offer options like this surreptitiously enough then to what degree is this technology really needed.  I don't see this as a reason not to pursue ths research but certian application are definitely going to be more useful than others.  Frustration is a part of learning and I find this one of the most interesting questions raised.  You suggest that you can detect the difference between good frustration and bad frustration but can bad frustration be a good thing at times at least from a learning stand-point?  We'd agree that many valuable things in life are only gained by going through frustration first but surely this frustration is at times the bad kind that we're not enjoying (low valence, high arousal if I'm following correctly?).  It might not be a good thing in terms of a life-lesson for people to get used to not having to deal with any bad frustration.  It's arguable whether you or game-makers should even have to worry about that but it could have an affect on society if it became widespread and mainstream.  Also this article raises some of these similar issues written by someone who regrets being attracted to RPGs when younger since they offered him success without frustration.  Well worth a read.

1. Sure, I can see how some games could profit from the implementation of this technology.  But like each introduction of new technology (at least in gaming), it would probably make several games worse.  For example, the unnecessary implementation of motion controls in more than a few games starting this console generation.  Developers would need to have a genuine interest in using this with their games in order to implement it well in their games.
2. Yes.  There are just other methods to achieve the same goal.  No need to gauge the child's emotions.
3. Well, I would think anyone who attempts to play an 'edutainment' title would experience good frustration as that person would probably have a genuine interest in what they're trying to learn.  Therefore, if they feel any frustration during trying to learn with the game at all, they would probably have a high valence to it anyways because they actually want to learn from it.  I think people have bad frustration with general education because they learn more than a few things that they don't want to learn or they don't care about.  I think that good frustration is what motivates the person to try even harder to learn what they are trying to learn, and that's why its presence is important.  I have no read that article yet but I've read discussions on the same subject, and I'm not sure why experiencing success without frustration is a bad thing.  Of course, like you mentioned, in life it takes hard work and effort for the things you want to enjoy, but in video games people don't want to feel that frustration sometimes.  It can be fun to just turn on cheats in a video game and just destroy everything in your way.  I believe that's one of the reasons why some people enjoy hacking in online multiplayer games or cheating in other ways, to the frustration of those who play legitimately: because the cheaters enjoy feeling no frustration while defeating the other players.