Is it o.k. to direct set insulated glass units? The application is a south facing wall of fixed glass. What are the ramifications?

What do you mean by "direct set"?

Bruce

If you mean setting insulated glass without it being in a frame or sash, yes that has been done.  Be aware that the bottom and sides may require rubber like shims to allow for expansion.

Thanks Alton. That is what I had in mind. I was thinking I could buy I.G. units and place them in site-built wood frames. Do you think that using wood to hold the glass in place (stops) gives away a lot more heat transmission compared to vinyl or fiberglass frames?
As window technology evolves, I thought it might be easier to up grade using this method. I plan to live here for the next 20 years.

I do not know about using vinyl or fiberglass versus wood frames as far as efficiency.  I have used the I.G. units without sashes set directly into framed openings in the wall.  Used cedar backstops for low maintenance and caulk to reduce infiltration.  I did this to save some money and it worked well.  However, I would prefer that the I.G. units be in sashes.  Easier to handle and less likely to damage the seal.  Check with local stores about fixed glass units in sashes ready to install.

Regardless which system you use, be sure to allow the required amount of clearance so the glass will have space to expand.

IGUs usually are placed on neoprene setting blocks and there should be space on all sides to account for thermal and other movement as Alton says. If the IGU "grounds" against the framing it will probably break (less of a problem if wood frames are used). At the same time, you need enough "bite" in the frame around the edge to keep the IGU from being sucked out in high wind conditions. This is not usually a problem with small, residential size lites of glass, however.

Make sure your IGU is labled (inside or outside) in some way so that the coatings are installed in the right direction.

One way to (slightly) minimize conduction around the window is to use neoprene gaskets or a foam tape (speciific for glazing, not the big box stuff) around the inside. The exterior sealant joint should be a properly designed joint using a material designed for that purpose.

The biggest issue is water sealing. Where does the water go if the caulking is not perfect? Commerical systems usually have internal flashing and weeps. I am sure there are details for site built wood windows in old architectural detail books (Graphic Standards, etc.).

Bruce

I'd be tempted to use vinyl or fiber-cement trim boards so that they never rot.