According to a source at Joystiq, Avatar Kinect will be arriving on May 27th. The update, which will allow users to have group discussions with full avatar control, including new facial tracking, in a variety of environments with recording and uploading available, is part of the Xbox 360 Spring Update schedule that will come in waves starting May 19.
Also included in the spring update is the ability to use Paypal for subscriptions and other purchases, extending Xbox Live Gold into new international markets as well as allowing users to not upload their credit card information, plus support for the new Microsoft disc format which frees up 15% more space for developers to use.