Of course they were virtual cards, that's what a "Magic: The Gathering Online" Exchange would be.
I think the confusion is that some people parse it incorrectly as "Magic: The Gathering" + "Online Exchange" rather than as "Magic: The Gathering Online" + "Exchange", so think that it was (planned to be) an exchange for physical rather than virtual cards.
Comments
Assuming a (presumably incomplete) scraping by archive.org is "convincing evidence", it was originally an exchange for virtual trading cards.
https://web.archive.org/web/20070525044536/http://mtgox.com/...
Of course they were virtual cards, that's what a "Magic: The Gathering Online" Exchange would be.
(But actually MTGO has it's own de-facto virtual currency - tix - which are regularly traded for cards through the MTGO interface.
I think the confusion is that some people parse it incorrectly as "Magic: The Gathering" + "Online Exchange" rather than as "Magic: The Gathering Online" + "Exchange", so think that it was (planned to be) an exchange for physical rather than virtual cards.
Which is 'in beta' and never had anything else on that home page.
It's just a placeholder text.