Virtual world living could be a reality, however there are some serious issue with it. People can and do become so wrapped up online with out the virtual reality part today, and forget to eat drink or sleep, they forego the basic needs of life for a life that is not real. being immersed in a total virtual reality how many would die, because they forgot to live? How many would die because any wake-up system was disabled by the user or by a hacker?
There will always be some that want the virtual life, and it will change things. Nature would have a chance to re-bloom, as all the VC (Virtual Citizens) would not need much just a tank bed that would feed their bodies, remove the waste, and sync their sleep cycle up to the Virtual World. You could reduce the city land mass of a place like new your to a couple hundred acres.
There would have to be Tenders, people forced to feed and power the VC's. To dispose of the ones that die. Automation has come a long way, a lot of this could be automated, but machines break down, natural accidents happen, there would have to be real people with the knowledge to repair, update, or replace machinery that failed. Not everyone would be able to be a VC, and that could cause discrimination effects and war. In this case the simple act of the Tenders walking away would be a war against the VC's, becuase there would then be no one to tend to their real life needs.