Onlive is pretty cool, if only I could spare the bandwidth, but it's def the future of gaming.
I'd be surprised if it doesn't work straight out the box, the Nexus 7 isn't that different from the Galaxy Nexus, which I've played OnLive on, certainly in terms of screen size etc.
My major gripe is that most of these games just don't play well with a touchscreen. Perhaps a physical controller hooked up over BT would be the solution.