"There is no truth to this speculation. Ken's comment is in reference to rotating the left analog stick while hitting the X-button to move different things in the game."
While the statement seems to confirm that Banjo-Kazooie will stick to conventional controls, it by no means denies that Microsoft is preparing a magic show for E3. Will the wand be waved? Stay tuned.
Update: Rare has this to say: "There's no truth to the Banjo motion control rumor. Banjo has been designed to be played using a gamepad from the outset. People shouldn't take rumors that gestate in comments sections so seriously. They can often turn out to be red herrings, as is the case with Banjo and motion controls."