I think you mistake excitement for what could have been rather than what is.
When the concept was first revealed, it had some interesting potential. Not necessarily my kind of thing, but it may have been cool.
The problem is, they've failed to create a compelling virtual world. Every segment of the world is small and divided by a loading screen, it takes too long for everything to load in, there is very little to do, and really no reason for doing any of it. If you want people to inhabit your virtual world you've got to make something that those people would like to visit. As it stands, it's a clunky, slow mess. I think the idea (especially with all the video stuff) was simply too ambitious for its own good and they couldn't pull it off.
I think it's absolutely awful and useless. The XMB is already nice looking and they should focus their efforts on further streamlining and speeding it up.