Not knowing how much serverload 500 customers represents, it's hard to give an accurate answer.

Overall I haven't been very impressed with EC2, it still seems very experimental to me. For all of the hype about Amazons infrastructure EC2 has had absolutely embarrassing downtimes and outages.

IMO, people need to concentrate on the "E" in EC2, it's elastic and can snap back and bite you in the ass if you're not careful ;)

As a SaaS company, your uptime IS your company. This is doubly true during the early stages when you are trying to get customers to trust you and continue using your service. You HAVE to spend on your architecture, that doesn't have to mean your own private server farm, but you should get your initial webhosting from a company where that product is their primary business, not an experiment.