Whilst there are many issues with this service, US only, no wireless connection, only 720p, games aren't actually maxed out and do look blurry, privacy concerns ladedadadda
I think the biggest problem and the reason it may fail is that the bandwidth is massive, most people run at over 720p now, a fair amount of us run 1080p so in that aspect they are all ready behind (most users will be using a t.v or monitor). A streaming of 720p for 1 hour, works out at something like 1.3GB alone, now I'm limited to 20GB (I can go over) so it means I can barely get 15~ hours of gaming a month at a sub par resolution

Even for ISP's supplying unlimited 720p will strain their resources and lead to throttling meaning they won't be able to use the service becuase of insufficient bandwidth due to throttling (virgin users would suffer horribly).
And think about when it goes live in the UK maybe a few years from now, everybody will want 1080p as it will be the standard but it will require a 12megabit connection or maybe higher. For a start not a lot of people can get that and even in a few years won't have those speeds but think about the bandwidth for that an hour your looking at 3GB for 1 hour of gaming. That will strain resources a lot and lead to some throttling I'd think.
Most people already use a lot of bandwidth a month for general internet use and downloads whether limited or unlimited, adding on top 3GB for every hour of gaming would really push ISP's to the limit (if it caught on).
Playing on portable devices even though running on a lower resolution would also cause some trouble in regards to bandwidth me thinks.
Forgetting all the other problems I think this is its major flaw and will ultimately lead to disappointing uptake.