I used to play a lot of Warlords Battlecry on the PC years ago. I would spend a great deal of time building my cities and armies, often taking hours to complete levels that could conceivably be done in 15 minutes if I would stop building and start fighting. I did at one point play Warcraft III, and I was rather amazed at how it could do so well. The characters were about ten times the size, but they were almost cartoon-like compared to Warlords Battlecry, and the number of unit types and playable sides were pathetic in comparison. I was completely unimpressed, and when I later learned that they were going to create an entire world based on this game, I was dumbfounded. "Who would actually spend time here?" I wondered, bemused. "There's no way something like this will sell."
I think the best way to describe A Kingdom for Keflings is, it is very much like Warcraft III (not World of…), but without the "War". You are, pretty much as the title implies, building a kingdom for a race of people called "keflings". You direct the keflings to go and get resources (lumber from trees, rock from quarries, etc.) and bring them back to the workshops. Once these workshops have enough resources stored, you can have them build building parts. Put certain building parts together on the ground in a certain configuration, and you'll have a new building. Of course, to know what parts build what buildings, you have blueprints; and to make things easier, when you have a blueprint selected, the ground will be highlighted where parts need to be placed to complete the selected building.
Instead of a "big metal hand in the sky" for directing the keflings and arranging building parts, though, you play as a giant, someone about four or five times the size of a kefling who walks among them. You can select from one of a few predefined giants, or you can play as your Xii. Ooh, exuberance. It's nice to be able to bring in your predefined avatar; probably even more interesting to play co-op with a friend's personalized Xii as well, but I haven't tried that yet. Probably an irritation about being a giant instead of a disembodied hand is that you are subject to the terrain, in that you can't move through buildings or trees — however, I have yet to be completely prevented from going anywhere, so it's more conjecture than anything. The huge advantage is, you can get involved in the game. If, for instance, you're waiting for more rocks before you can build the final piece to your building, instead of waiting for your keflings to mine it, you can go and mine it yourself (and, being a giant, more quickly and efficiently, too).
Occasionally, the mayor will get your attention and give you quests. So far, these have been really trivial tasks — build so many buildings, stock so many of such-and-such resource in the workshop. The rewards are little things, like love from the keflings ("love" is an item that is used to "activate" a house, bringing more keflings into your kingdom) or items that let you, as the giant, do bigger and better things (move faster, lift more resources at a time, etc.).
Constructing buildings unlocks blueprints for more buildings in a sort of "tech tree". For instance, building the stone cutter's shack, which lets you turn lumps of rock resource into a cut stone resource, unlocks blueprints for buildings whose parts are made of things including cut stone. It's kept fairly simple; in general, if you look at your list of blueprints and keep building the buildings at the bottom of the "tree", you can be pretty sure that it'll unlock the next building, and you'll have what you need to build it (or at least start collecting the resources for it).
It's a very casual game. There are no time limits, no enemies to attack or be attacked by, not even a natural disaster or disease to worry about. All you do is build, build, build. The game does a good job of hand-holding for the first few minutes and gradually letting go. The only real frustration I have is trying to remember, when I'm in the workshop, how many of each part I've already built and how many remain for the building I'm working on (as all parts in the current blueprint are highlighted, it's not a question of which, just how many). And when that's the only frustration (make a mistake and over-build, and you simply have to punch the part until it breaks down, then take the resources back to the workshop and try again), I think it can be said that this is a fairly low-stress game.
All in all, I think it's a pretty good casual game, and being the first Arcade game developed with Xii support (but not the only to support them; when the NXE launched, Uno and a few other games were immediately updated so you could play with Xiis in place of gamerpics), it makes a good entry for their "new and casual" theme Microsoft seems to be targeting with this whole New Xbox Experience.