Yes.
> how (setup)
Postfix (http://www.postfix.org/) and Linux.
> and where (VPS, dedicated hosting) do you do it?
At home, on my static IP FIOS link.
> Is it worth the hassle?
No hassle, once setup. Configuring Postfix for basic email is not so bad. But, you will need to learn a bit about email handling to do the config.
Worth it, yes. No one mines my email for advertising purposes once they arrive. No one suddenly 'closes down' their service and my emails disappear. If the NSA ends up wanting my emails, they have to show up here, where I know they have arrived, vs. just quietly asking some provider for them. I don't have to use some services awful web interface to read/reply (I get to use whatever I want).