Never gonna work
It's a nice idea but it's never going to work.
First, most people still have very slow broadband connections and those that don't still have usage caps. This is not gonna change any time soon.
Second, gaming is pretty much always at the cutting edge when it comes to technology in terms of graphics, AI, physics, etc and for that you need a local high end piece of kit if there are a lot of concurrent users, if only to avoid the lag.
The only way I can see this sort of service working is to offer old games to casual gamers (think like those plug into your TV gizmos that you can buy from Argos). It just doesn't appeal to the hardcore market.