Hmm... fun fun fun. My current feeling is that the KVM/VPS is the way to go - slicing a single box into 10 x 50/mo = 500/mo = 6,000 pa. Needs to be comparatively cheap because there'll be no control panels, web interfaces etc. Many of the alternative ideas rely on volume - but I can see enough problems getting 10 sign-ups, let alone 100+ with some of the other things I've considered. So, having a play with a trial VPS at OpenHosting...
occasional jottings on what I'm up to...