Actually, this is more or less solved. https://parsecgaming.com/ works really well over a local network. I use a raspberry pi as a thin client to stream games to my tv from a windows vm in my closet. I cant even tell a difference. Its not just for games either; its basically a gpu accelerated remote desktop.
They claim it works really well for remote servers (they even let you lease environments I think) too. For less intensive games, it probably works fine, but for more latency sensitive games, Im sure you can feel the lag.
I honestly don't understand how anyone can say this with a straight face. I've tried multiple solutions over a local gigabit network, literally just streaming from my gaming PC upstairs to the living room PC, using Steam streaming, Nvidia streaming, and while good, they are very clearly being streamed. Especially in high-detail or darker scenes the artifacts around low-contrast areas are horrendous - it feels like watching a movie rather than playing a game. And even when playing locally the latency is still too high to play racing games for example, I just couldn't get used to it.
The problem is latency.
In a world where I am not even happy with the latency, or delay on most of the Code Editor, Keyboard, Screen, Display etc. And Gaming Display Monitor being 120Hz and trending towards 240hz+. We are not even anywhere close to solving latency issues in a local environment, let alone one that is separated by a fibre Optic.
And I not sure about "dreaded" the 20min update, on a decent Internet connection, most of the time is no longer in the network, but CPU decompressing the Data and installing it. But they way update are package are still optimise for minimal bandwidth, not minimal user time.
I dont think the problem with Gaming industry is Distribution or Delivery with Cloud Gaming. It is with the forever increase in Asset Prices. Middleware Engine helped Software Gaming Development cost to stabilise. But the Asset, especially Graphics will need ways to dramatically reduce its time and cost.