If you notice, when it's working, both the blue and red light is on, on the pseye. If just the red light is on, then it's not working. I think it only works in arcade mode, as mentioned above.
What is with the skimping on the career mode? That is the main part of the game and the only part I have ever sunk considerable amounts of time into throughout the series.
I was hoping that this feature would help justify my purchase of the Sony Move