Correct. Still needed a thin or dumb client to actually run the VM with the PCI-E pass-through. But this would have lots of benifits. For example having the big ass machine be stored in a closet while using a a much more heat and power friendly system in the office. Also having the big ass system be able to run all of the OS's including the game system without having a game or driver crash killing all of the other VM's. In Theory you wouldn't need much more then a Nettop to pull this off. It could also be shared in the sense that anyone wanting to play, for example portal could pull up this system, sure one at a time, but not much different then an Xbox in that sense, but not tied to a single location. Also you can use it for multiple systems, as long as you have another GPU.
To much effort for someone like myself, where the home computer is 75% gaming anyways. But I could see how fun it would be if I had the time and the kickass machine to spare, to go through all of this hassle, and centralize everything and just build up a cheap $300-$400 box for my room. As is this is more of an enthusiast movement then an actual recommended option.