While you aren't going to build the next Call of Duty using Microsoft's new game design engine, Kodu, you can definitely have some fun designing a short side-scrolling platform. Are there limits? Yeah, loads. This isn't going to replace the XNA Game Studio, but for only 400 Microsoft Points, it's a cheap way to have a little fun creating games.
Kodu was built for people without development experience, so anyone can jump in and start designing their own game. It uses the Xbox 360 controller as an input allowing you to change and shape terrain, build simple (and even relatively complex) logic, and you can choose from a number of different characters each with their own little quirks and bonuses.
But Kodu can't do everything. In fact, it's only meant for relatively simple games, though the project could grow in the future depending on how much it catches on with the community. If you are serious about game development, the XNA Game Studio is a great place to start. You can also check out development tools like Torque that can be used in conjunction with the XNA Game Studio.
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I just reviewed the game, you can in fact make the next Call of Duty! (Well, maybe not as good, but you can do first person shooters in the game)
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