...so you've used it? I mean you clearly have experienced this lag in the games you've been playing in Onlive.
Otherwise this is just speculation contrary to my actual experience and that of numerous journalists. I feel as a network engineer, a netcode debugger for multiplayer games, and a former pro CS player; I have a unique perspective on this particular claimed issue.
Round trip latency, for me, falls within a 50ms to 100ms. It's noticeable to only the most competitive players, a large majority of FPS players will not be able to notice any input lag at all. With latency continually trending downwards, it will only be a short time before it's completely unnoticeable.
I'd say that, while Steve Perlman's projects haven't been misleading to investors, they are simply a victim of timing. No matter how savy the CEO, you can't predict the future. WebTV's spectacular failure was largely due to the technology bubble leading up to the early 2000's. Perlman, however, was not at the company when things went south, but like many other tech companies, experienced fantastic success up till that point. WebTV was purchased by Microsoft in 1999 after Perlman personally met with Gates and described his vision.
In my opinion. He may be ahead of his time, but his ideas are still relevant. Especially with the transition to XaaS, consumer grade solutions are becoming more cost-effective every day. When is that break-even point? Steve Perlman is still trying to get it, but he'll let us know when he does.