Having ticket machines on public transport vehicles (trains, trams, buses e.t.c) is a very well established method of buying tickets in a variety of European countries. Of course, the only time it's been tried here recently, to my knowledge, was the disastrous First FTR in York. They picked a rubbish machine (which gave no change nor accepted cards) and expected most passengers to use it without serious regard for off-bus ticketing solutions.
In my experience, onboard TVMs on the continent tend to fall into two categories;
1) Urban transport, especially onboard trams where stops don't have TVMs. Off-tram/bus ticketing is strongly encouraged with appropriate discounts but if a user needs to buy a single/day ticket they can onboard without taking up the drivers time. *Amsterdam has a different take on this, where seated conductors were reintroduced early last decade - probably due to the higher volume of onboard ticket sales by irregular users such as tourists*
2) Lower volume rail services, where some or a majority of the stops don't have ticket purchasing facilities. The TVM usually assists the guard, as passengers are expected to purchase tickets from the machine. In some cases, the train is DOO with a TVM, but this is not consistent practice. These lines don't tend to get really crowded, so getting to the machine is not usually a problem (exceptions for people with disabilities or so). *Basically, lines which rely heavily on the guard to sell tickets in the UK, might be suitable for this type of solution. I am looking at you, Northern, FGW Local and ATW*
Those on the forum that are advocating a nationwide smartcard scheme, of course in an ideal world it's a modern solution to ticketing. The Netherlands has rolled out the Oyster-style 'Chipkaart' across most modes of transport on a national scale. However, due to the disjointed set-up we have here, I doubt that will become reality here before, err, 2050 or so! The Swift Card we have for buses in the West Midlands isn't even accepted by the major operator of bus services in the region!