...they'd have made a small low res handheld system with a built in web connection like the Kindle, the naturally low resolution combined with the comparatively high connection speed (Compared to the resolution) would be perfect for playing current gen console games on the go. Maybe the idea isn't perfect, but it's a much better niche than going after people who are too cheap or too poor to afford a decent gaming computer or a console by offering a subscription service before the technology is there to support it.

One practical use for this would be to run staggeringly complex real-time physics calculations in real time. One example would be doing the necessary calculations to render a physically realistic sea with weather conditions into an animation. You could then send this to users in a sea MMO for example. There are many other cool game related things you could do with it, rather than wastefully rendering some uncanny valley mobile phone game at 2 FPS.

I think it's a fairly interesting situation but you're probably right, nothing is likely to come of it even if it were repeated in other cases with different games/companies/media.