Actually, John I am currently using the eTAP in my PC as my echo for playing "live" through my PC speakers to backing tracks . So, the answer is, yes on both counts -- you can record and you can play live with VST plugins, it just depends on whether your output is your PC speakers, your amp, or a PA . . . and the best part is that you can add as many other plugins as you want, for example reverb, tremolo, chorus, distortion . . . the sky's the limit !!
and most of the VST plugins are free!! The only reason I recorded Blue Star and did not play it live was that I do not have the proper recoring equipment for recording live stuff, except for a regular camcorder mic . . .
For best results you have to have a decent sound card in you PC or laptop, or a USB connected audio interface, with zero latency, which means that you can play and hear youself in real time. I have a regular Soundblaster Audigy sound card with an ASIO driver and that is quite enough for me. But if you want to use, let's say your laptop in a live situation, you have to have a good soundcard or audio interface, but nowadays that is not expensive at all. So, yes, this is definitely the way to go, especially for us "bedroom players." In my case, I don't don't even need an amp, because I can plug my guitar into my Korg Ampworks, and into the PC and into a PA, and you can get a fantastic Shadows soundwithout having to get all expensive equipment, not to mention carrying amps and stuff!! I think that nowadays, even some professionals are starting to use laptops for guitar effects. After all, today's analogue or digital outboard echo devices (Zoom, Magic Stomp, Alesis, Atlantis,I guess even the TVS3) all use similar computer technology and algorithms and stuff like that, and that is what your computer does using the VST plugins.
If you and other people are interested I could explain and demonstrate this in a separate thread, or maybe even make a "tutorial" video !!
Cheers,
Bojan