Clearly iMovie on the web would not require you to upload your video in order to edit it. My first reaction was to unilaterally reject the story as well because of this. But when I stop and think about it you may not have to upload your video files in order to edit them.
With new web technologies I imagine it is possible to create a web application that works with video files stored on your local system. You wouldn't have to upload anything unless you want to share it publicly ala YouTube. Whether or not having a web application for editing video is very useful is a whole different discussion but I think it is doable...
If this is the case, then there's no point. You wouldn't be able to play/edit video projects on any machine other than the one that holds the actual media, unless you upload the individual clips (meaning GBs of video, and hours of time). So yeah, you can stick the editor in the cloud, but what's the point if you can't see the video-in-progress on another computer? So why bother having iMovie in the cloud then, when it offers no advantages to editing locally?