The VMU was too limited. Have you ever tried playing NFL 2k/1/2 with VMU play selection? It doesn't work as good as you think it would. The VMU was a good idea that was too far ahead of its time for its own good.
The problem I see with the technology is that if done properly, like with a good screen possibly with touch sensitive technology, it would drive the overall price of the system through the roof.
If all three companies are going the 599$ route in the next Generation, that would leave an oppurtunity for someone to creep into the industry with a lower end system(if done correctly). -Wishfull thinking from a Sega Fanboy.