She decided she wanted to push for a smart system that encouraged you to interact with your surroundings via the interface rather than ignore your surroundings in favor of the interface.

And I agree with that statement, it might turn out to be better than everyone staring at their phone, but they are still feeling the need to interact with their surroundings with a gizmo instead of their own body they already have. Talk to people, draw, read a book, etc. There are plenty of methods to interact with the world around you without some layer of technology. That's my view of that. So while it may be less intrusive, it's still a filter/layer of gadgetry in place of natural interaction. But whether it's a HUD like Glass, or a phone app you're looking at, it's still an app/gizmo distracting from what's REALLY going on.

Also, feels like it's just another logical step in a progression towards complete integration, where an interface is indiscernible from the body using it. Which I think a lot of people would think was really cool, but I find unsettling.

I'm right there with you, that's a little unsettling to think about. The world around us is already beautiful and interesting enough for me, I don't need to enhance or augment it, if anything I find those augmentations and enhancements take away from the world around us an genuine human interaction for the sake of human interaction, not to analyze it, or put it on twitter, or interface with some social application via Glass.