Edit: I just re-read about having lots of little sites. I will consider a reduced-functionality (eg. as you say within the hour notification) but allowing more free sites as an option.
As you can see, you have a lot of sites competing with you (which means you have a market!). Now you need to distinguish yourself.
I'm having trouble finding a service that does the following:
* Offers me a free service that's suitable for sites that aren't that critical.
* Once I need a higher level of service, offers me a way to gradually turn up the service and payment.
Maybe I'm expecting too much out of a free service.
EDIT: I realize what my expectations are now. I think Google has spoiled me. Here's what I expect (and I think the web monitoring service that can offer this solution will likely win):
* Monitor an unlimited number of websites at a frequency of not more than 60 minutes. Will send an SMS and an email if the site is unavailable or too slow. (Maybe there is a cap on the number of SMS messages per month.)
* Offer very gradual price increases for increased service (gradual like this: http://site24x7.com/site24x7-pricing.html)