If true, does this sound like Amazon is violating the terms of use? I thought they guarantee to provide a certain level of service, such as CPU percentage, regardless of your neighbors.

I am not a virtualization wizard, but I always thought Xen and other hypervisors have CPU usage caps. If you're not getting built-in protection from noisy neighbors then VPS becomes just a crappier version of good old shared hosting. True? False?

P.S. I've been Slicehost user for 3+ years and all instances I've ever had there exhibited pretty much expected performance.