Hardware: Half a cage at a colo with one fast box for web/db server, and a few cheap pizza boxes for build server and misc. This used to be two boxes in a garage behind a business DSL until Twiddla went big.
Content storage & delivery: S3/Cloudfront
Heavy lifting: EC2. We spin up a half dozen boxes each night for a few hours of processing for S3stat.
Email: Google Apps (they're terrible, but free and functional)
Tools: MSDN + EmpowerISV = $400 for all the dev tools for the shop. Small Business Server for the boxes in the cage. ReSharper, CodeSmith & RedGate's SQL stuff are actually the biggest per dev cost, but they make life so much better that they're worth it.
All in, it works out to about $500/month to keep up and running. Total, across all our sites (and there are quite a few). The colo is expensive, but it's so nice. Even with the cloud stuff where it is today, I'd still put a box in a datacenter if I had it to do over again.