The problem is if you don't introduce latency you have to project into the future, that means you will always be wrong in the case of any discontinuity of motion.
Which will introduce artifacts.
As to using it for reflections, if it takes 2ms, how does that compare to actually rendering them?
2ms is a long time when you only have 16 for the entire frame.
It's an interesting idea, the value would be very much dependent on the artifacts, they don't have to be very severe before it's a net loss.
Since most motion will be natural, it should work most of the time. However their results seem fine, things do not seem to overshoot. There's also a 2 frame version with which adds a frame of latency, without this problem, which could be used for cutscenes for example.
For the reflections, it could be used for cases where your game runs at 60fps, but you don't have that much budget for reflections and it would normally run at 30fps (like the forza example), anything you can render at 30ms can be made to look like running 60fps, so you have about 30ms and not 2ms. But you do have to have velocity buffers. Also, it's quicker for reduced resolutions, which would be the case for reflections. 720p takes 1,5 ms on that PS3 actually. Also, for reflections you may not need as complicated solution, you might not need per-object velocity data, just information on camera velocity could do the job.
Could interpolated-framerate be used partially, like for obviously predictable movements (scenery), and so free up some time every other frame for other computations?
This is exactly mentioned in the future work section! Separate scenery from objects, and render the scenery at 20 or even 15fps. It surely could add a lot of image quality, with minimal artefacts, you obviously need to interpolate shadows and reflections separately, if I understood the method correctly. You'll see camera pans work perfectly in the 15fps -> 60fps part of the video, while there's visible artefacts on the objects (which is not noticable at 30fps -> 60fps).
60fps is nice, but 30fps is more than acceptable for most games, especially if it's a smooth 30fps without dips. I'd be more interested in making sure they all run at 1080p.
This technique could allow you to play those steady 30fps games at 60fps, which is quite a nice bonus, IMHO.. It could be optional, tho.