I'm not sure anyone really took Peter Molyneux's comments to heart when he retaliated against the criticism following Fable: The Journey's E3 2011 showing by claiming that the game wasn't the on-rails adventure/RPG that it appeared to be. And if you did believe him, well, Lionhead's Gary Carr just contradicted the former company frontman in a new interview on CVG:
The key problem for Fable The Journey was that, from the very moment it was announced, it was packaged with these preconceptions. Preconceptions about Kinect, preconceptions about on-rails shooters, preconceptions about Molyneux promises. I think, with all this assumption, everyone was bound to lose sight of what the game actually is. Given the game's limited scope and lukewarm reception so far, it's starting to make me worried about Lionhead's future as a whole.
It's interesting you say that. Every single game is on-rails. I can score a fantastic goal on FIFA if I press certain buttons in the right order at the right time, that's the rails bit.
Peter's [post-E3] on-rails rant, if we should call it that, was him trying to hit back at the criticisms saying that it wasn't on-rails. I think, if we had done this again, we would have just said, yeah, it's on rails.
The truth is, at the time Peter was saying it wasn't on-rails, we at Lionhead were considering free body movement. But it was awful. It just wasn't fun.
The truth is, we were actually close to killing that E3 demo, but some of the team tried to revive it. We did come back from E3  with some people saying, we're doing something wrong here. We need to change course. Ultimately, the decision was, keep the faith. On-rails is actually necessary to make the game work really well.
We are building a story-based game, a well-crafted world, a powerful narrative, a beautiful looking game. All our money is going into that. We are not messing with alternative control schemes any more.