To be fair, Youtube pushes 720p down over a 10-15mbps connection alright.
BUT, they have had the chance to pre-encode it, which makes a huge difference. Doing it in realtime is probably not practical, even at 720p.
Its certainly feasible. With maxed settings I generally have no issues on my desktop downconverting a 1080p source to 720p h.264 through handbrake at roughly film rates, 22-26FPS. Just notching the conversion settings from the ultra high ones I have to something modest, but still good I can easily get it up over 40FPS.
So real time encoding of a 720p stream is easily possible, without GPU involvement.
Its how Widi/Miracast work (but leveraging the GPU/Quicksync). They on-the-fly transcode the video output and push it wirelessly to a receiver. Of course I doubt that the 1080p output is able to fit in to 15Mbps (though maybe).
There is also resonable lag, 250ms IIRC on the latest version of Widi (I have no idea on Miracast).
And its also a "local" protocol. Not something Intel/MS/others have extended over a network, other than local wireless streaming.
Its theoretically possible with a nice and powerful system you could both run the game/video AND transcode the video output to push it through a remote access protocol for KVM control and relatively seamless.
It would take a lot of grunt, there is likely to be resonably big lag still and you are going to need a BIG pipe the the machine still, especially for 1080p content.
Afterall, its how remote gaming technology that Sony is working on and a few others do/did works.
It isn't as nice as an experience as being in front of your desktop is, and especially gaming, is going to add massive overhead on the machine, but its doable. I just don't know of ANY one who has it out there is a "install on your own machine" type service.