I believe i read it when it was just posted.
In the sense that the developement was started 7 years ago, the consept isn't that stupid, since it makes a lot of sense in the context of conventional wisdom.
I'm pretty sure that the guys at OnLive have noticed them getting disrupted by Nintendo. If the best selling system today has hardware, that wouldn't have been bleeding edge even at the time OnLive developement was started, it kind of makes the whole idea look a little obsolete.
I think that OnLive would have used a few more years in making the service better, but since it looks like the need for very expensive gaming hardware is going to go down, they want to launch the service while there still are people who are interested in it.
The publishers who are supporting the service, are the ones that jump to every opportunity there is, because they also are the ones with low profit margins (and, they also know that the cost of games is going up for them). Then, they run into problems if they get the money based on playtime, since it forces to have good games in the service. If a publisher gets 30€ per boxed game, they get the 30€ when someone buys the game, no matter how crappy it is, but if a service like OnLive pays the publishers by basing the fee to playtime, the crappy games don't get playtime and publishers won't get payd, which leads to less games on the service, when the number of games in the service is important for its success.
As for not having, for example, Wii games on the service, it's pretty spot on, since people want to play the games available. If there are no interesting games, there is no interesting service.