Most likely the lag will be unbearable for most people, at least in the short-term. In the medium/long-term I see something like this taking off when they install servers in a large number of countries and ISPs, which will reduce lag a lot.
I don't know anyone with a connection which can sustain consistent 30 ms ping times to any but the closest servers. In reality ping times vary during a playing session, which means Onlive will either have jerky framerate or visible lag due to buffering...
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