Last Year Alone MS spent over a billion dollars on their datacenter to provide the X1 and office 365 support. I think MS is putting their money where their mouth is.
I am not sure if your calculations really work that way. The reason why is because we really do not know how the cloud compute can or will be used until we see development along those lines. Graphics are an interesting subject because pieces and parts do not have to be render in the same conventional since they are done today, just the final image. I have heard a few different unconventional statements from developers on this part whick will be very interesting if used. I might throw up a post on the subject to get a discussion going.
Also your solution really only goes down one path and thats bandwidth but there are solutions to get around such problems like having a hosted instance you sync to in the cloud where you are not sending a bunch of data but telling the host what should be processed, have the cloud process those parts and stream the results. As I mentioned in other post, you let the cloud process the environment and let the local system process the immediate stuff the user is interacting with to reduce bandwidth or issues with cloud streaming. I am sure there are a few stuff that can be streamed in advance or stuff that can be stream on demand that do not take a lot of bandwidth.
I believe there is to much conentration on the graphics part of a game without understand all the other parts that goes into a game. Also people are limiting the scope of what you can do to what you think is possible. A lot of people do not create games and I believe you are limiting your understanding based on limited info on the subject. Even I do not create games but I do develope software that interact with cloud based services and some of the solutions I mentioned is how you get around some of the issues mentioned. I am sure game developers will think up even more ways to geet around those issues as well as unconventional methods that solve those problems.
I see people dismissing graphics being rendered over the cloud but what about some of the initiatives by Nvidia with their Grid and Intel. Graphics can definitely be done in cloud space and we may actually see such development down the line
nVidia has some very powerful servers with lots of Kepler boards and they are great for professional rendering for movie studios, who can afford to pay $20K+ for these things to improve productivity.
I don't think MS have GPUs in their cloud. Xeon CPU's designed for cloud don't even have embedded graphics. Even though one or two cores on a Xeon server may have quadruple the power of the Xbox One CPU, it's actually not enough to draw much graphics. The XB1 can render far more graphics on it's own.
We shall see. There are a few things that can be done, but not very impactful IMO, and take a lot of developer effort. I mean, I'm a graphics developer. If you asked me to come up with any ideas for using the cloud for graphics I could give you some, but if you asked me if I think it's a good idea I would say no way.
Devs will use the cloud for what is a good fit, not try to do something weird which would break the game if you had spotty connectivity or an offline user.