While I can understand your position, I feel that there are better alternatives.
1) Musicians should be smart enough to store their projects responsibly. I store all of mine on MS Onedrive, which means my computer/HD could be destroyed and I would still have all of my projects. There are a number of solutions like that that make it easy. Beyond that, what are you actually saving in the cloud? It can't be the complete project file, as the VST doesn't have access to that info. At most, it could save the presets and the progressions/melodies you've created in the plugin. Those are pretty useless on their own, as the real magic happens once you export your MIDI to the DAW. Finally, a hard drive crash would still mean you have to reinstall the VST. I don't really see the benefit in what you're saying here.
2) I think this is the real reason it's online only, and I can understand that. However, pretty much every other company manages to make their plugins profitable using offline technologies. Why not licence it with iLok? You may have noticed that iLok enabled software almost never shows up on pirating sites because it's very difficult to get around. Either way, the number of potential customers you're losing due to the online-only requirement probably outweighs the potential loss due to piracy. You have to remember - those who pirate it would not have bought it anyway. You're assuming that potential paying customers are becoming pirates, and I find this hard to believe.
3) This is professional music software, not Facebook and iCloud. Facebook is a free service which is funded by ads, for one. iCloud is free storage solution with payable tiers. Those are completely different models, and you're comparing apples to oranges.
Again, I understand your position, but you're doing yourself a disservice and you don't realize it. I believe this model will decrease revenue. The biggest problem is that you are asking us to pay for something, and then trust that Mixed In Key will be around for the foreseeable future. What if I want to use this in 10 years and for some reason you've gone out of business? How can you ask customers to pay for something that you could then cut off or charge more for in the future? I'm not saying you WILL, but that's beside the point. They users takes on all of the risk here. Most musicians, and particularly professional musicians, want to know that the software they use is THEIRS and that they can count on it, regardless of whether the company behind it still exists.
I've said it before, but every large and small plugin and DAW company has faced this decision, and the vast majority of them have come to the conclusion that offline is the way to go. Don't you think it would be foolish to assume that you somehow figured out how to make this model work? It doesn't work. I'm sure this won't change your mind, but it will certainly change the minds of many of your potential customers.