Sounds like a good idea, running the stuff that needs low latency locally so that only assets that aren't as latency dependent are streamed. If they can nail down a $150 or less price on the streaming box it will be a really low priced entry point into next gen for budget conscious gamers, should help give them an early leg up on sales next gen.
Of course they need to nail the price of the streaming service as well for that to work, it can't be priced anywhere near the crazy high price of Nvidia's GeForce Now game streaming service, which is $25 for 20 hours of playtime as I recall. MS needs to either a. offer per game pricing with both multiple hour based rental tiers options and lifetime access purchase options, with lifetime streaming rights purchases per game being somewhat comparable to the $60 you pay for that game physically; or b. offer a streaming service with cycled games, like Gamepass, but with more new 3rd parties than Gamepass has, for like $30 a month; or c. offer both the service and per game options
Even if they nail the streaming price, they still have to worry about consumer limitations.
If this streaming platform is targeting the budget or cash strapped crowd, would one not have to worry about the fact that those same people may be data capped. Doesn't matter how good of pricing MS does compared to NVideo, if after 20 hours of playtime the consumer hits their data limit on their internet provider.