This brings to mind something I'd really like to see: it should be standard practice for ISPs to offer VMs that act as the gateways for the actual last mile connection to the user's home. It's cheaper for ISPs to offer bandwidth at their facility than to send data all the way down residential lines just to come right back. I think this could revolutionize the internet by making p2p viable for more applications and much more efficient for what it already does; how much more usable would Tor be if all three hops didn't have to loop pointlessly to someone's house (over whatever shit connection that may entail) and back? If course, I don't see this happening any time soon; customers don't know they want it. Edit: this is actually much more doable now than I thought, because it doesn't necessarily require ISP cooperation. I looked up my CenturyLink IP and it's consistent with a Qwest datacenter that offers colo; that's all I need for the "computer in the webs, interfaces at home" model I was looking for.
Sure, ISPs are known scumbags. But what makes VM providers so trustworthy? Are they outside the government's reach? If anything, it's easier to monitor them - they're all in a few buildings. A gateway-VM model would by nature require the VMs to be more distributed.