Don't worry, I host serious stuff on a single machine, and am quite happy with it ;) What set me off a bit was the shared hosting. You don't want noisy neighbors, usually. That's worth a few bucks.
Agreed, VPS providers often blind users with super low prices, I didn't even notice this until I started hosting game servers where realtime performance is important. Always make sure that "iostat -c 1" column "%steal" is zero. Luckily there are providers which give guaranteed performance.
