I remember at the time, people who were dismissing network transparency were saying that people should just use web apps or some kind of VNC-like pixel scraper. First, the web apps idea is ridiculous of course. Second, the mention of VNC in a distributed environment causes many of us to break out in hives and desire a quick death.
At my previous place of employment we relied on both of those aspects of X for both us developers and also our end users. (Now we're probably talking old X here -- Solaris 8/9 so maybe it was Xsun and also RHEL 4/5.) Let me admit first of all that we weren't doing anything impressive like 1080p video playback or gaming or something like that. We just had a Java application, but network lag was generally not an issue [on especially non-flattering hardware]. Granted the distance between boxes was not particularly impressive (about 5 miles one-way trip), so latency was probably not an issue. For our end users, there were times where they preferred to ssh into a main server, redirect their display to their local box and then launch the app from the main server (which I actually thought was headless but I could be wrong; not sure if that's possible). So you could have many users on a central server simultaneously and the local GPU would do the heavy work. Since our app was very data intensive (lots of data in, lots of data out), the network traffic from X was sometimes preferred to what you'd have to deal with through NFS.
Now modern X might be completely different and not even allow for the distributed load concept any more. And perhaps the VNC-like solution is the best going forward (or maybe something better can be created? something GPUDirect-like?), but I can understand the firestorm early on when the whole concept of networking was sort of dismissed as a sideshow that could be tacked on later if somebody ever got around to being interested. I think some of that controversy has died down as communication has gotten better.
But certainly for our UNIX and Linux systems X network capability was a critical component of our environment.