The way OnLive is cheaper is that it smoothes the usage curve by allowing people in different places, different time-zones to play on the same server. Once the utilization rate up, it is a scalable business.
In your "dorm room" scenario, I fail to see any advantages in server utilization perspective.
Well, look a little harder, bub. I'm talking about installing one to share amongst an entire highrise. :) A mini-datacenter if you will. Each city could have one out in the burbs.
I'm surprised hotels haven't moved much past N64, which even the ones that have it are using emulation (I am suspect of this claim myself, but confident enough to post it). ---Actually I think I've seen at least NGC available from hotels. (Both thru the CATV & ordering system.)
Edit (Yay, I thought my comment had baked set already!): LodgeNet used their hotel PPV delivery systems for game rentals on demand, and they were run on console hardware, with the video piped over the CATV channel dedicated to that room. I have no evidence to support this, it was a PITA to search.
I got hung up on http://en.wikipedia.org/wiki/Nintendo_M82 , Which I knew wasn't the FAMICONBOX I was thinking of. http://web.archive.org/web/20071011234713/assembler.roarvgm....
My point is lost to me.
Edit2 (It's late): Anyways, I shouldn't have jumped so aggressively about your claim of no HDD & delivery, Since I also would like to see console aggregation.
I don't know the mechanics of how it was arranged. They charged only an "access fee" and not per game, so perhaps it was a shared emulator / arcade style machine?