We have a very strong positive relationship with AWS and meet with them often, both with senior leadership and account managers.

Im uneducated in this space, whats grey about it? isn't this effectively what heroku and other services do? They put a layer on top of AWS, up charge a bit and make profit that way?

AWS doesn't care, they make the same money off of reserved instances as they do on on-demand instances as they do on spot instances. They know exactly what instances cost to provide under their various pricing plans and that's what they set the price to.