After reading this old article http://www.ausgamers.com/features/read/2614953 it got me wondering if (potentially exclusive) OnLive games would need any sort of rating, or if they would just be exempt and not even submitted.

I would say they would have to change the policy on this, as an OnLive title (lets say Crysis) would indeed have a start and end while being technically 100% online.

Any opinions/facts on how ratings will work for OnLive?

Interesting question! I guess its the same as things like Steam where games are sold from an overseas location - I suspect there won't be any rating issues, but I'm not 100% sure on how it works. I'll see if I can find out some more infoz.

The Web Filter will block any game that is not safe for the children.

Yes the dreaded web filter, I can't see that happening.