Playing devil's advocate, because I hate to see the overreaction:
-I can almost guarantee they will work out rental deals with redbox, blockbuster, gamefly, etc. They would be foolish to leave money on the table.
-Put a piece of tape over the kinect sensor if you don't want MS to see you in your underwear. It's not like they'll be recording you on some server. relax.
-24 hours of offline play: If your internet is down for more than 24 hours get a new provider. My PC is always online and that's where I game the most. You're not taking the xbox out of your house to go camping so what is the problem?
-You can still trade a game to a friend. Once it's theirs, who cares what happens to it next. And there will still be avenues to sell your games. Amazon, gamestop, CeX... they'll all be there.
-Sharing all your games among 10 people = amazing. I can see 10 of my gaming friends and I working out a system of who buys what. That's 9 less games we each have to buy. Makes up for the lack of trade-in.