If they do ending using this "always on" feature, they can pretty much just hand the next gen over to Sony. Customers will desert them in droves or just stick with their 360's and not upgrade.
Requiring a constant connection does NOTHING for the customer and is only there to benefit the publisher who are increasingly bending the definition of what it means to sell something and what it means for someone to own something they sold them. Imagine if your car's engine needed a clear radio signal on the stereo in order to run. How many drivers do you think would buy a car that konked out the second they hit some RF static?
For games where online functionality is either non-existent, superfluous or only a component of the full product (Mass Effect 3's MP mode for example) it make ZERO sense to lock out the single player, or even local multi-player functions. It's draconian, it's obnoxious and nothing good will come of it.
Also, who are they kidding using piracy as an excuse? If this does come about (and i frankly doubt it because I just don't believe MS are *that* stupid) I'd best serious cash that within a matter of days, some bugger will have cracked the OS to ignore the function and the only people suffering would be the legitimate customers.
Also, I don't know about anyone else, but one of the reasons I like having my PS3 in the living room is that if the cable goes down (which it has been known to from time to time) is so that I can stick in a game (or film) and not sit in the dark like a nonce.