I think Apple foresees not only the logistical problems they might face, but also all the issues a user’s might encounter. Ease of use seems to play an important role in the way Apple designs iOS software. I think there are too many potential potholes in an entirely cloud based service for Apple to pursue as described by Mr.Hackett. Again, look at what people are saying about what’s currently on the menu.
If iCloud rumors turn out to be about music, I think an achievable scenario might be for Apple to introduce a streaming service over both Wi-Fi and 3G. Content you purchase from the iTunes store could be browsed and streamed over your devices, no uploading or downloading required. iTunes could just browse the index of purchases linked to your account and make them available to you. I could envision movies and TV shows also being available to stream, albeit only over Wi-Fi. A service like this would also pave the way for a subscription service, another popular rumor, allowing you access to a certain amount of music at some fixed rate. Subscription models are definitely gaining traction and Apple is well positioned to make a move in that space.
I like to dream big, what can I say?
Granted, I usually end up disappointed.