The information needed by a spectator client would be basically the same as that needed by any gameplay client.

The general "gist" of the idea is exactly the same as spectator modes that already exist in tons of games, they just usually lack mass-distributing the game data. But that should be a very solvable problem when you're dynamically allocating dedicated server hosting for the same clients anyway.

This is certainly possible, and given Microsoft's current game development and server resources, probably not even "that hard."