I don't think the lag issue is so clear cut. All of the scenarios presented so far make the assumption that maximum processing is demanded at the
onset of an "event" (thus the lag effect would make the use of networked resources impractical). This [the actual moment when great processing is demanded] may or may not be true. It's just as possible that the computational flare ensues as the event
unfolds, rather than just at the initiation. Presumably, the initial event will be handled promptly by local resources. By that time, the network resources will be coming to bare to handle collateral and chained physics events, that come as a result of the initial event.
For example, maybe the exploding barrel is something that local resources could handle easily. It's the development of a realistic fireball, and then the expanding pressure wave affecting other nearby things or heat wave igniting other nearby things, that could be computationally accelerated by network resources. This "secondary" event is of a nature such that lag effects are maskable and manageable, while still running in credible manner. Essentially, who's gonna notice a few missing ms here and there while beholding a peripheral visual event?
In a similar manner, the use of local vs. networked resources may be determined by the nature of the event- smaller but very abrupt vs. much larger in scale but not rigidly time dependent. The smaller event can be calculated effectively on local resources, as long as it doesn't get "too intensive". The larger event is of a grandiose scale and requires a considerable computational load to accomodate properly, hence it is more suited for networked resources. Think of the intense demands of a global weather simulation. No way in hell a single processor core will handle that in a reasonable human lifetime. However, a cluster of networked resources will handle it nicely. Given the scale of the simulation, no one is going to care if it happens a few ms earlier or later. I'm not saying a fireball simulation is the same as a global weather simulation. However, the potential for
scale is very similar.