PlaydoJam - Flash-based EyeToy killer

PlaydoJam uses a proprietory games engine which lets you play free, EyeToy-like games on any computer with a webcam. Could free web games like this hurt Sony's (rumoured¹) plans to make PS2 a cheap, EyeToy-based casual games machine to compete with Nintendo Revolution?

Make sure you watch the demonstration video [requires Flash Player].

¹ This rumour pertains that, once PS3 has launched, Sony plan to bundle EyeToy with every PS2—as a super-affordable package—in a somewhat lacklustre effort to steal casual gamers away from Nintendo Revolution.