I've been exploring the idea of starting such a service. But with the uncertainty of whether or not the new 1099 law will be repealed, it's not worth the business risk.
If congress goes Republican, it will be repealed, if it stays dem, all bets are off. In any case obama will have to sign off on it. Don't know what the chances of that are. Its fairly easy to get set up to file W2s electronically. I have done it as church treasurer. Don't know if the same setup would allow me to file 1099s electronically, but one would hope so.