It's not going to work. At all. For many, many years.
OnLive requires a 5MB/s connection to work with *little* lag - but still lag.
For action games - especially first person shooters, it's unusable due to the lag. Even if you had a server within ~10 miles, it's still going to be bad. Not to mention the fact that most people that *can* use it are going to be well over 100 miles away and increasing the lag.
The costs for hosting such games is going to be very, very expensive. The cost of hosting games ad-nauseum for older games (think a Halo 3, 5 years from now) will be high, because they still require lots of bandwidth-eating for such a service.
OnLive spouted a lot of claims at GDC, but cannot, and will not deliver anything viable to the market that looks decent.
And again, you MUST have a 5MB/s connection for it to work well. How many people actually have that kind of connection? It *may* work for a game like Civ 4, but that'd be one of the few that'd work. Even then, could you imagine the costs of getting enough computers to host streaming games for 1000's of players at once?
20 years from now, cloud gaming like OnLive may work. But today, it will not.
Oh, and the 1.5mb quote? Guess what: Are you really going to be able to play a game like a Gears of War or Crysis on a screen the size of a standard youtube box? Yeah, thought not.
Back from the dead, I'm afraid.
