I don't know if you're a current gamer/customer of OnLive's, but let me tell you they've done a fantastic job at solving latency issues. In fact, the only time it's noticeable is for driving games (unplayable quite honestly).
For other twitch type games, first person shooters Onlive works surprinsgly well. I've played through Red Faction, Home Front, and a few others and they all play very well. Some of the slower games, Patrician for example, play very well on OnLive.
I won't sit here and tell you that latency is of no importance, it most definitely is. And true they need more data centers to be more responsive. But as a gamer in the midwest (Milwaukee), I can tell you OnLive's game service is quite responsive and a decent alternative to constant workstation upgrades.