Endpoint Protection Cloud

If using both Symantec Endpoint Protection Cloud, and SEPM, If either service goes down, would clients automatically connect to the other service?

I do understand that Cloud clients connected to the internet and not to our corporate network would not be able to access the SEPM.

Nope - both are separate environments. You'd need to set failover to LiveUpdate ( for updates ) or put a SEPM in your DMZ ( for full management ).

SEP 15, which is out in the next couple months, will have full management capability from the cloud.