I think the blue lights only show when its connected. You would get pretty red lights

"I'm having trouble understanding you right now."

I have some ideas for a more strict but more user friendly household firewall device and corresponding UI, if something really really needs the Internet.

But your lights, TV, etc. don't live in an Amazon datacenter.

You're right of course, but interesting sidenote: in the murder case I mentioned the police ended up looking at the suspect's smart water meter logs... which showed the use of about 140 gallons of water in the middle of the night. So... no, it doesn't all live in an Amazon datacenter, but it these days it might live somewhere.

Not if it is configured to connect to a server in your home with all the data it needs to function.

Oh of course, but I wonder if by the time you'd created that system, you'd feel the result was worth it? Is what Echo offers really so valuable you'd go through the trouble? I wouldn't.

I don't own an Echo because I don't feel the convenience of such a device is outweighed by the obvious privacy implications. I would be more likely to use it if it was located within my home but at that point the limiting factor would probably be cost. This is why such a device would have to provide additional functionality.

In a world where it is just expected that you have a personal cloud server in your home Alexa becomes an "app" on that server and the Echo continues life as a very nice speaker/microphone device you can place in a visible area in order to interact with that server.