It's unlikely that outfits wouldbe made as prizes, as the dev would either have to deal with a whole different submission and approvals check on that, and distributing it would have to happen across EVERY internet-attached xbox in the world. That's easy for a teeny user-icon, but less enjoyable to consider for a textured, rigged polygonal object.
I suspect they'll do something like have a preset T-shirt which can have a decal of the player-icon of choice. All they'd have to add is an additional dialog on top of the current shirt-selection UI.
Instead I think what's going to be pushed is using the avatars more in upcoming games, like they've already done with UNO (which has pretty sweet implementation), Kingdom for Kelflings (how did they manage that ass framerate?), and Bomberman Live (lame avatar implementation).
I feel like I'm the only guy who likes the avatars. I thought I was going to hate them, they seemed way too much like Wii's Mii characters, but they turned out to have a LOT more detail and expression.
