That's exactly the problem. If the "ping" to the datacenter is too high, the gaming experience will be not great (lags). As the mouse/keyboard/gamepad inputs have to do a round-trip to the datacenter that is more problematic than traditional multiplayer games. You need several data enters around the world, near the gamers. Even than it will be unsuitable for certain games like high speed multiplayer ego shooters (Counter Strike, Quake 3, Unreal Tournament '99) where even a minimal lag of a wireless mouse/keyboard is noticeable and wired gaming input devices are used.
Most online games have the ping problem anyways. Imagine everything in a [] is in the same datacenter or house.
[client] ------ [game server] ------ [other_clients]
[client] ------ [onlive server - game server ] ------ [other_clients]
And it doesn't really matter how the other clients are connected, they could be using OnLive as well. This would work amazingly well for online shooters or MMOs.