My major problem with this console is that the price difference between "a box that can feed the TV with a screen off the network and cope with all the associated problems thereof" and "a traditional console" is not likely to be wide enough to make the inevitable disadvantages worth it.
Cloud mania appears to have obscured the fact that personal computing power continues to grow. We are currently in a momentary I/O bobble that will resolve itself in a year or two with solid state drives (which, by their fast pace of development, seem eager to catch up to all the other components of the computer), leaving only multicore to deal with, which putting this sort of thing in the cloud can hardly ignore either.
By the time this thing comes out, the box + one year of service will almost certainly cost more than an XBox 360, and will probably be going head-to-head with the "Playstation 4" or the "XBox 720" with what is now the current gen readily available for $50. The PS4/XBox360 will probably be bragging about pushing 120Hz of 1080P with surround sound.
My minor complaint is that this just won't work on a consumer grade network, full stop. It will take years to make the deals with Comcast and everyone to get the necessary QoS that this would take. Nobody is streaming video out in real time over the internet. "Real time" here doesn't mean "real time minus two seconds" or "streaming a video while permitting a 5 minute pre-buffer", "real time" means a solid, uninterrupted stream of data with no more than a handful of frames of latency, where the slightest network bobble means your game freezes solid.
Fat chance.