I think you're all missing the bigger issue here - this is for playing games installed on their servers, not games you install on your servers. So how are you going to get them to install "any emulator" and "any ROM"?
Latency isn't necessarily insurmountable; especially if they had several servers they could keep ping as low as < 50ms (plus a few more ms to get to your wifi router, this is with power savings off). Ping is round trip; ideally this should only be one way - you send controls with a timestamp that's buffered in a separate thread by the server and applied to the game as soon as it's available. Then the server sends back audio/video asynchronously. Compared to any real netplay situation it's a lot simpler since you don't have to synchronize/negotiate latency ahead of time, so you really end up just eating the minimal latency from the start. Which can be as low as 30ms or even less.
If this wasn't suitable for anything but slow turn based games then there's no way netplay with emulators would work worth anything (or multiplayer matches in FPSes for that matter), and for the record I've beaten Contra 3 on hard in 2p mode over netplay, with a fixed latency that was probably higher than what I'm describing. A couple frames may keep world class players from top performance but for most games and most gamers you'll barely even notice it. That's IF they have good servers and you don't have to go to another continent to get there. If any of these services want to make it big I imagine they'll at least have servers in North America, Europe, and maybe Australia.
The other issue, bandwidth, really isn't supposed to be one on Pandora. They say you minimally need 62KB/s, maximally around 250. Didn't craigix say over 600 was attained? I know some of you are getting like 100 max, but what happens when you turn off power saving? Anyway, my cable connection is capped at like 170KB/s, but I can still stream video well enough.
XxionX; People have talked about remote desktop sort of applications all the time. It's been done on PSP, it's been done on iPhone, I'm positive it'll be done on Pandora. It doesn't seem like such a revolutionary step to me.