It'll fail flat
>> "It occurred to us that by doing this live submission of characters – which by the way was how the original instant messaging clients worked"
Back in the early days of the mainstream Internet, when dinosaurs roam the web, we had three distinct modes of personal communication: the public and very loud IRC, the personal peer-to-peer "chat", and of course, e-mail. People used to use e-mail for asynchroneous communication, and IRC for community building. Peer-to-peer chat programs (such as Talk and Powwow, among many others) allowed for real-time communication. This meant that you had to make a date to talk to people: you had to make sure they were there, and while you were chatting, they *had* to be there and pay attention.
Each character was transmitted in real-time, and you could see every typo, backspace, re-type stutter in painful detail. You knew when the other party took a bathroom break or if their attention wandered by the mere fact that you were staring at the screen and no characters had come in during the past few minutes. You also knew when they weren't home, for your chat requests kept failing.
Then one day IM, as we know it now, arrived. I remember ICQ when it started: it wasn't so much deferred "chat" as it was instant e-mail. You type a message, you send it when you're ready, you *may* get a response. You hoped that your party was there, but they didn't have to. They could be doing something completely different while talking to you, since it wasn't obvious when they were typing.
People saw the benefits of instant messaging, kind of real-time, but not necessarily; kind of personal, but not really; kind of peer-to-peer, but mostly federated. Eventually, real-time chat--with its attention and availability demands--died a painful death (IRC remained for various historical reasons, but did not survive in the mainstream consciousness). There's a reason for this. Perhaps it's the same reason why video phones, though technologically feasible, never made it as a commercial product.
But more importantly, all throughout, e-mail remained king. Some would do chat; some others would do instant messaging; there were even those who would do IRC. But *everyone* did e-mail. There was--and still is--an appealing quality to e-mail's apparent deference to time and immediacy. The recipient has the choice--and this is well understood and expected by all users--of responding at his or her leisure, or urgency, as the case may be. There's no obligation; though a response is expected, the sender knows not to hold his or her breath waiting for one. And that is good.
Now Google wants to go back to real-time, character-by-character chat--not as an improvement of instant messaging, but as a replacement of e-mail? Good luck with that!