You might be able to get by without HD for PS1 and PS2 games at least. But yeah, the tech is hampered by the fact that many people don't have good enough Internet for it to really work, and there are limitations as to how well it can ever work.
In-home streaming works pretty well for the Wii U Gamepad Controller... But IMO using PS Vita for PS4 streaming just isn't good enough, even on my local network with a pretty solid Wireless N router (and PS4 wired). Can feel the lag, and the 30FPS limitations. Yes it works fine for some games. Lag isn't going to bother anyone playing Final Fantasy. But I like playing a lot of action fast twitch stuff. My PS3 is an original model that handles all PS1 and PS2 games as well, so right now I'm good with two consoles for all my PlayStation brand stuff, which works for me.
I'll admit that similar tech, OnLive, does work better than I would have expected, but I really hope that cloud processing for games never takes off in that way. I'll take a console rendering my game with me at home any day of the week.