Margaret Soltan at University Diaries has a major vendetta against on-line education, as well as laptops in class, Powerpoint, etc., all positions you might expect of a humanities professor at GWU. In my younger days I used to be an early adapter, so the idea of online education makes a lot of sense to me. So I'm torn.
Matt Yglesias came out with a good post which strikes to the heart of the problem of online education, but I'll link to Kevin Drum's commentary/excerpting of it. The problem is, of course, almost no one is self-motivated enough to do online education.
I think there's a simple solution to that problem: your online university requires the student to deposit a total fee, say 50 percent of the cost of an in-person education, or $50,000, whichever is smaller. Then, as the online student completes courses and passes tests, she gets a refund of part of the deposit..