Internet download caps and Latency issues say No.
No to mention the likely onerous subscription fees to keep this network running, with even MANAGEABLE latency. I mean look at how much WoW costs per month, and that isn't even rending anything, it's just running simple collision code.
I mean the very fact that we have heard NOTHING about the pricing of On-Live shows only one thing: it will be so expensive they want to keep it secret as long as possible. And this is at the same time as consoles have become incredibly well priced, I can pick up a decent condition PS3 for £170, and Xbox 360 for as little as £100.
Edit:
OK 10-quid / $15 per month is not "terrible" but seriously, in just one year that adds up to 120-quid / $180 but how much is a games console now? Seriously, an Xbox 360 easily goes for 120-quid / $180 and not much more and you have a PS3 but ON TOP OF THAT you have to pay for the games that you rent and "buy", that is "buy" in quotation marks as I can still play Dreamcast games but if OnLive goes down, that's it, rental removed, game gone. Steam has a back up to allow your purchased games to function FOREVER no matter what happens company finances wise. God this is looking worse and worse, death of console gaming? More like death of brain cells.
Another problem with HD-gaming on On-live is how incredibly NARROW that definition is: 720p and 30fps ONLY
Well what about the hundreds of
60fps titles like Burnout, Call of Duty and entire genres like Hack n' Slash, and Fighting games, driving games, On-Live just can't handle 60fps. And I play ALL my PC games in 60fps.
Then what about how more and more games are now coming in 1080p resolution, like GT5, Wipeout HD and the upcoming Perfect Dark remake.
And as an avid PC gamer I expect to and regularly play all my games in 1080p+ resolution and 60 frames per second, everything from Batman Arkham Asylum to Modern Warfare 2, on PC it is 1080p60 all the way

and I know that OnLive just cannot offer anything close to that. And preview code has shown that beyond the resolution, the in-game graphics aren't that amazing on server side computing (according to reviews of preview code) as clearly they are skimping on processing power to save money only end up with graphics worse than the PC it is streaming to.
Another problem is the compression, I don't care what anyone says, there is no way you can compress ANY image at 720p that that few points of data without losing quality. That means blurrier, more washed out, shit really and couldn't REALLY be considered 720p there is literally only enough data there for some 480p image (and they type you'd get over a crappy composite video input).
Combined with all the lack of controls of graphics controls (some prefer v-lock, others prefer higher frame-rate), it is the LAST thing I bloody well want.