Unlikely to happen. Companies like Nintendo sell most of their hardware based on the expectation from consumers of triple A First party titles from them. If Nintendo is moving hardware, third parties will always fill the vacuum to make money. This is just one of the reasons why this is unlikely to happen. (I just used Nintendo as an example it could be any of the big three)

Onlive is not available in a very large rural USA population. That's not going to change for awhile. Even if it did, it wouldn't kill consoles, it would just change them. If anything it would kill PC gaming because nobody will want to spend 1000s of dollars building a beast of a PC just to stream the game at the same resolution that an $80 set top box could. People will always want to sit on their couch and play with a controller. Cloud gaming is going on right now, but most people like to actually own the things they buy not just pay to use them.

The consoles are already PCs, because the advantages of a console (cheap, low power, high quality games, short load times, no need for installation, no hardware compatibility problems, uniform experience for all players, same controller for all players, no patches, no risk of malware, no extra features distracting from game quality, no adverts, no social media spam, actually owning the disks, backwards compatibility) are all gone.

So do you want an HP/Dell branded PC or a Sony/Nintendo one?

A console IS a PC tuned specifically for gaming. So technically we have always been on PC and we will always be on PC. Just the way the service is provided will be different.

Man when has cheapness ever been an advantage of consoles? If the Wii U launches at $300 it'll be one of the cheapest consoles in history after inflation; at $350 it'd still be at the lower end of the pack.

How much did a PC capable of playing the latest 3D games cost at the time of the PS1 launch? PS2 launch? (I have no idea, also electronics prices are disconnected from reality in the UK)

Buying a console has got to be cheaper than buying a PC with comparable components and performance just because of mass production If I'm wrong there, there's still a lot else that consoles have lost. The next generation will not have anyreal  hardware differences with a computer, all the components will likely be off the shelf parts because of how expensive custom silicon is now.

You could argue that a console feels expensive because it only plays games whereas a PC is a neccessity today so paying a little extra to get gaming capability isn't the same.

Consoles are basically custom PCs at this point anyway. Difference is we can enjoy many of the same games PC gamers do, but without things like compatibility issues, DRM, constantly upgrading hardware and software to run the latest games, etc. And we get this all for around $300.

You pretty much hit the nail on the head. Those are the main reasons I don't have a gaming PC. 

Pardon my editing this down.  I did cut out a bunch to get to your point.

My take?  You are thinking WAY to traditional in your thinking.  If you want to believe consoles are going to go away, then the platform itself will go away.  It isn't going to be about gaming on the PC, but gaming on whatever device you choose.  The PC itself is being supplanted at this point by tablets.   If you want to talk cloud, then you are  beyond PC gaming to gaming on any device.  Gaming then becomes a service people subscribe to.  It isn't about a PC, but about a service.  This picks up the moment cable companies and others do the streaming.