Last month at the TED Conference, Lionhead CEO Peter Molyneux showed another demonstration of Milo & Kate. During his presentation, he speaks a bit about interacting with Milo and how no two people will create the same version of the boy. There's also some stone skipping and room cleaning action to be had.
Watching this makes me wonder what exactly the role of the player is in Milo & Kate. You seem to be able to affect his world in some way. At the same time, I don't expect that the player will ever interact directly with any other character. That leads me to question whether anyone else is aware of the player's existence. Maybe you're supposed to be an imaginary friend. If so, Milo & Kate is Drop Dead Fred: The Videogame. Awesome.
Check out the video below.