Alright, I played the demo finally, and here is what I think.
The controls are DEFINITELY not as fluid as Halo2, which I think severely hurts it as a console FPS. It has a similar control scheme, but where you can pick up the controller in Halo2, sit down for 10 minutes and figure out the controls and how EVERY mechanic in the game works, this is not going to be possible with UC2. Due in part to the melee system.
Which brings me to my next point. UC2 is probably going to fail in that it is trying too hard to be Mortal Kombat in the melee system. There are three basic moves for each character, pretty much a small, fast attack, a medium attack, a heavy attack, and a couple combos and a finishing move. It, unfortunately, feels as much like an FPS with melee added as an afterthought as it did at GDC2004.
However, I think this will still be a defining game for the Xbox. It's rare to see as POLISHED a game as this, especially for a console FPS (and especially following up the disaster that is UC1). I think the game will succeed on many levels for most Xbox owners simply because, through all of the problems I listed above, it is still extremely fun. As limited as the Melee is...it's kind of like playing Swords only on Halo2. On there ou only have one move, but it's still extremely fun. As far as I'm concerned, UC2 is expanding on THAT idea more than it is becoming a fighting game.
Which is not to say that the melee system could not have used alot more work...
I personally feel the two play systems jive better than just fine, however the game ends up feeling like two games, one very well developed and the other just kind of slapped on top.