We get this question a lot. It normally is asked by people who have issues with uploading their photos to the cloud. See the security FAQ. People who inquire about this want to purchase Project Photofly from us and host it on their own internal servers. At this time we envision Project Photofly as one of many cloud-based services that will be available via Autodesk Cloud. So I think we would work on solving the security issues using protocols like https before we would offer a locally hosted version of Project Photofly; however, nothing is ever set in stone around these parts. After all, it's still just a technology preview.
Service is alive in the lab.