Looks like bandwidth is finally sufficiently cheaper than hardware for companies to try to take advantage of that.
From the article it sounds like the were able to play an FPS like Crysis just fine. FPS seems to be the gold standard, if you can run an FPS you can play any other type of game because they don't have the same type of split second reaction times.
It definitely sounds like an interesting system to try. I can't see how they could possibly stream HD content fast enough to make an FPS playable - but maybe that only works on a fiber connection.
Not to mention the huge variety of brokenness that happens with PCs, which they're going to have to deal with (they have a client for Windows/OS X as well as the set top box).
To be honest, I would be amazed if latency didn't kill this project. Or turn it into a puzzle game platform.
You're not talking about the same kind of latency problem that these guys face.
It seems that this service is sending the player's input to the server, and sending back compressed rendered frames of video. So, the soonest you can see any of your actions is the round-trip time.
Current FPS's do a tremendous amount of simulation on the client. Only state information is sent back and forth, and not everything is even in lock-step with the server. It's a completely different architechture.