In addition Valve have been playing around with biometrics a lot for their internal playtesting, and have expressed interest in bringing that to the living room

In addition Valve have been playing around with biometrics a lot for their internal playtesting, and have expressed interest in bringing that to the living room (for example, the "director" in Left4Dead is supposed to adjust the difficulty of the game dynamically to keep you on your toes - data on your current emotional state and stress levels would be a valuable input for that). Gabe definitely mentioned at one point that there was a possibility of putting some basic biometric hardware into a controller, and they've also spoken about experimenting with new forms of input before (and have supported 3rd party novel input devices such as the Novint Falcon). It's very clear they want to experiment in the controller space, and they have stated multiple times that they do not want to be in the console business, and would rather provide the software for other companies to build their own "Steam Boxes" - yet for some reason everyone fixates on the baseless rumour that they will be making a console, rather than the play that's right in front of them.