As I've been studying the reseller options out there one thing is not clear to me....

One type of a host offers the reseller a gig of HD space and 10gigs of transfers and unlimited domains... does that mean that each of your customers is allotted some of that overall space in sub-directories and each of their transfer amounts combied can't exceed your total allotment? Is that how it works? Are they sharing your DNS?

The other types of plan I see is the host requires you to maintain an account and gives you the option to resell their existing plans at the price you set above their wholesale price to you. That means each customers site is standalone, has their own DNS. etc.

Can someone clear this up for me? Am I reading this right? Thanks

You are perfectly right, only thing I did not fully understand is your issue with DNS.
With both types of reseller you will need DNS entries per customer to point to the right directory.

I meant that if the I the reseller use virtual namesevers the customers are all on my nameservers.

You get your own nameservers,
and then any sites that you host use those nameservers.....