We found out that our 3 year old storage hardware had some firmware conflict with Xen (or something like that)
took 2 weeks to diagnose + a plane trip out to fix, even then we weren't sure we got it.
after this, we moved to Rackspace.. there is no way that a sys admin running one rack of equipment is in the same position as Rackspace to diagnose and fix these types of issues.
i imagine if Rackspace/Amazon had this type of problem, they would: 1. Have 24 hour manned data centers 2. Have the input of a team of 20 engineers working on the problem 3. Have a Dell/IBM/HP engineer at the data center within the hour 4. Have lots of spares - no calling in new hardware
Having been a (part time) sys admin for years, the worst problems are those that are hardware related and are difficult to diagnose.
(The other advantages of Cloud, e.g. scalability etc are well documented. But i think my ideal setup would be dedicated, non virtualized databases with Cloud front ends)