That is nonsense, otherwise the driver would have to be loaded at boot time, which in turn would mean installing a game would need a reboot which just isn't the case these days.
> It's completely different to DRM where there is no knock on impact to other legit customers.
The media industry claims that piracy cuts into their profit which would imply that it raises prices for everyone. So no, it very much is like DRM in many aspects.
> In the most extreme side you can just pixel stream a rendered video feed
Which is expensive since you now have to pay for the hardware instead of your customers paying for it, so that too is about profit. In a more extreme case you could put cloud gaming machines wherever CDNs put their edge acceleration boxes.
> You inevitably need to let the client have some sort of say (I shot at X), and it _will_ be abused.
No, not really. The client does not have to compute the canonical outcome of game mechanics, after all for any action they predict locally there might be an action taken by another player that is inconsistent with that prediction and they will only learn about that incompatibility once their lightcones intersect (which takes a few milliseconds). Something has to reconcile those, which might as well be the server rather than the client.
All a client has to do is to compute a tentative game state and the pixels that go along with it. That state will later be corrected once it learns about the canonical update, which can result in the infamous rubberbanding effect.
Most cheats that don't involve a broken game engine are of two flavors A) extracting information that the software has but the human shouldn't know (e.g. wallhacks) or B) having software perform inputs that the human should do (e.g. aimbots). A) Can be prevented by reducing the information the server sends to the client to the necessary amount to render their current view. B) cannot be prevented by any means as one could always hook up the output pixels of a GPU to an external computer and an emulated mouse via USB, this is analogous (heh) to the analog hole in DRM.
Neither of those have to do with the client determining "I shot at X" on its own.