" Or just some gesture based crap, wave and to launch flairs etc? "

Kinect body maps you to the mech and you have to be constantly doing the robot to play the game? That would sharpen my robot moves next time I hit the dance floor. Cross promotion with Dance Central robot dance training?    

I was kinda hoping Kinect would recognize my body sized controller from the last game and use that.

I keep wondering this too. Along with any FPS/things that generally have you tapping B to hit something. I can understand doing a specific gesture but after a while...just no. Its a weird compromise. And one of the reasons most people are so down about Kinect.

I'm all for another Steel Battalion game but I have no idea how you convert this

I would hope you'd sit down and move invisible levers and foot pedals to make your mech move.
I don't know how they'd map all of the buttons, but I do have an idea for one of them.

What worries me is that FromSoftware is making this and not NudeMaker (the guys that made the original two...yes they have a classy company name). This likely means we likely get a mach third person shooter and not the fucking awesome sim.