Just found out about this via Twitter and it's certainly piqued my interest.
I'm sure they're going to cop a lot of flak over the art style so I'm issuing a pre-emptive "shut up and play something else, then" to all those people.
Co-op questing with Live friends seems like it could be a lot of fun. Though I hope they take into account that some people will have a lot more time to play and advance their cities than others. Could be a little boring if you have the super duper archers and spearman and catapults and your friend can only contribute club wielding savages.