Just to add to this thread.  Not much has changed since my presentation last year in Las Vegas, which can be summarised as thus:
- DNN will work just fine with Amazon EC2
- you need at least a medium high CPU instance to get decent performance (assuming sql server + dnn on same server)
- The pricing means that  it's not competitive with traditional shared hosting nor VPS style hosting, but can come into it's own particularly when balanced with other featuers
- EC2 only gives you web hosting, if you want email/dns services etc (that come with many hosting packages) you'll need to sort these out separately
- you get virtually no support from Amazon, so if you need periodic hand-holding you'd be better off with a traditional hosting company

EC2 however, does provide flexibility, fantastic tools for load balancing, scaling and services and very transparent pricing. 

EC2 is also a very good candidate for doing things like integration testing, testing of DNN ugprades on your live data, and things like that.  It can also be used as a standby failover solution for total loss of server contact (think loss of datacenter, etc).

In short, it's definitely worth your time investigating but make sure the sums add up and make sure it's a good fit with your needs.  A one-server low traffic website probably doesn't need EC2 at this point.

Azure is still behind  EC2 in this area, although DNN will have some changes going forwards that will remove some of the problems with Azure compatibiltiy (in particular the Sql Azure needs).