Isn't a major issue how to disperse heat in space? That seems bad for data centers.

No, it won't.

From the man who promised us self driving cars in the last decade.

Most immediate advantage is latency for space-based Internet relay. I can see a market for low latency /real time applications. I think the issue here is that we have to re-think what "the edge" means here, since locality of data is literally changing by the second. Maybe a by-space-for-space data service? An interesting question is data sovereignty. Whose jurisdiction does it fall under? Relay-focused satellites sort of skirt around the issue, but a orbital data center is going to be different.