While I can get excited about this, in general I think it's a lousy idea. Someone, somewhere is paying for content development. This move completes the disconnect between the people using the content and the people paying for its development, although I suppose taxpayers are buying it and taxpayers are using it.... sort of anyway. What a huge increase in the direct intervention of the Federal government into higher education though! Higher education still costs what it cost before this program, but the information to students is now wrong -- they don't see the costs as clearly as in the past, and neither does society. That makes it more likely "we" will make the wrong decisions, invest the wrong amount of our resources in the wrong places.
I also wonder about maintenance -- government tends to be pretty good at finding the $$ to build buildings, but is typically lousy at maintenance. Learning objects and learning resources typically require quite a lot of maintenance. I am sure someone believes they can build a learning object around say basic algebra and then won't have to touch it again for years and years. I don't believe that is a realistic assumption though. Technology changes even if algebra doesn't. I can't play the original Pac-Man on my laptop anymore even if I wanted to. Some of the subjects mentioned do change -- biology surely incorporates new information even at lower levels. Econ wasn't mentioned, but it is taught differently now than it was when I was in school. Math should be taught via applications, but applications change and need to be updated.
Last, I am a customer of publishers in a different way from the way I am a customer of the government. I firmly believe even major publishers are more responsive to the needs and wants of their customers than the Federal government. The government gets my tax dollars whether or not they produce what I want -- the publisher does not. The profit motive, while much maligned in too many blogs, ensures that publishers listen to their customers.
On the other hand, I think this is the project Darcy Hardy went to Washington to work on. She should be very good at finding and fixing the problems.