Looking to spend between $50-$150 a month. Needs to scale up easily. Has to be able to survive Digg and Techcrunch (wishful thinking). Will be severing images mostly.
Trying to avoid amazon.
Colocate system for under $100 per month.
See http://webhostingtalk.com, look under "Colo Hosting Offers" forum for various offers from $39 per month on up. If you can get an offer that is local to where you are, that is better.
Reason: if you are serving images you will want lots of local disk space, and RAM to serve as disk cache or to serve as RAM for your webserver with its 1000+ connections.
Even more importantly though, they have excellent support. Forums, wikis, and live chat through their site. I remember getting help one time when I was first starting out, chatting with one of the owners at 3am on a Tuesday night as he helped me work out a bug with my server.
One of my past clients used them (around when they merged with TextDrive). Their Solaris setup is a PITA if you're used to Linux or *BSD. If you set up a 25-cent swear jar, you'll probably be able to pay your hosting fees in quarters!
The other thing to realize is that Joyent slices scale vertically: a larger slice is just a larger piece of a very large Solaris box, and there's a limit to how big they can get. (Don't know if it's still true, but at the time, they also had no way of directly upgrading a slice "in-place").
You'd be better off figuring out how to scale your storage (preferably with redundancy) across multiple computers. Look into MogileFS or Hadoop's DFS.
I've heard people say good things about http://www.servage.com for light processing sites that need high bandwidth and lots of space.
2) Layered Tech has been a good place for me.
As to hosting providers, I have 4 years good experience with openhosting.com -- they provide virtual servers with root access etc, pay-as-you scale (starting $20 a month, then growing as your RAM /CPU/Disk/bandwidth grows). Another plus is that they sit on a very thick pipe.
currently with vectoral.info, have been with them for something like a year now and love them in general, but their selection of linux distros is meh.
what was wrong with amazon s3?