a) telling students to install a keylogger, write an essay with it turned on, then submit the essay plus the logs, and then the teacher figuring out how to replay the logs, versus
b) telling students to write their essay at etherpad.com, they submit the url, teacher clicks on "replay."
As for the matter of students being online, that's going to have to get solved anyway, because all the apps are moving online.
I think that pendulum has almost reached the end of it's arc. There are a number of trends that are starting to pull in the opposite direction. From concerns about privacy and security to the proliferation of mobile computing, intermittent disconnection from the cloud has it's uses.
Tools like Google Gears and the continued blurring of the line between desktop applications and web applications mean that it's easy to build applications where being connected enhances the experience considerably, but the essential functions are still there even if the network goes away.
Ironically I think it's the tech crowd/geeks (us) who are most resistant to webapps. We can see the privacy,security,reliability issues. The average users however, cannot. They're already embracing webapps.
The big question is what's next. I'm guessing it'll be mobile - the geeks are embracing it just as the mainstream is finally becoming comfortable with last decade's technology. But it's a bit too early to tell.
First, there's the simple privacy issue. If a professor told me to install a keylogger on my computer or if she told me to use etherpad to write an essay - either way I'd feel like my privacy was being violated.
Then there's the practical issue of how this system would affect writing ability. I personally do my best writing when I'm able to ignore the critic in my head and focus on the words. Being self-conscious about someone seeing all the stupid things I wrote along the way would make it much more difficult to get into this state of concentration.
Finally, there's the issue of making teacher's not only read two dozen boring essays but also watch replays of them being written. I personally think their time could be better spent.
...and even then I use WriteRoom, full screen green on black, no formatting options: http://www.hogbaysoftware.com/products/writeroom
script -t 2> script.demo.time script.demo
xemacs -nw
# M-x tetris
# ; play tetris now
# C-x C-c ; exit emacs
exit
# watch tetris being played:
scriptreplay script.demo.time script.demo
There are already non-webapp mouselog/keylog and replay applications. And besides, think of the implications of letting students be on the internet while they are writing essays.