I think it's fine ughosting as long as you're charging accordingly for TRUE 100% dedicated resources. Can't say ElasticSites setup is better but then when the customers host websites that use their full amount of resources 24/7 to say they're using too many resources and they need to upgrade. That is then no different to Web/Reseller.
We offer 2 GB MEM, 2 CPUs on all Web/Reseller plans by default and all customers can burst to that amount 24/7 providing it's for real website usage (of course that is possible due to the usual overselling and knowing that not all customers will use 100% of their resources). But we did have some signup just to host crappy poorly coded scripts deliberately just to use 100% of their server resources on purpose for various pointless reasons (trying to kill the drives no doubt, SSD don't last forever
). Of course, we told them to host the scripts somewhere else as they were intentionally using lots of resources unnecessarily (just hosting some heavily coded WordPress sites with no useful content/information).
I think if someone needs more than 2 GB MEM and 2 CPUs for their sites then a VPS is the way to go. But now there is ElasticSites I'll no doubt offer that in the future for those who would prefer more resources than the 2 GB MEM, 2 CPUs we offer on our Web/Reseller plans but don't want to upgrade to a VPS. I'll fill up our current servers first before getting some beefy servers to offer ElasticSites.