Great article by the SDK team on the difference between extensibility features between CRM Live, On-Premise, and Partner Hosted. The big difference is that you can not install code to the CRM Live Servers. This is a good read to understand the technical difference in the deployment modes and should help to point to when you might want to go with the various deployment types.
There was also an error in our last EA2 Web cast ( by yours truly). I mistakenly stated that CRM Live would allow the customization of standard reports. This is incorrect. CRM Live will not allow this due to the reports being in rdl it would require direct changes to that report description. Sorry for this miss-information. Only reports created via the Report Wizard will be utilized.
Extensibility Features Live vs. On-Premise in Microsoft Dynamics CRM 4.0