I've been using Linode for awhile. If I was to rank what is important to me for a web server it'd go something like this:
1 - Uptime
2 - Overall Server Specs (memory, cpu, storage, bandwidth, transfer)
3 - One click vps adjustments (go from 8gb to 512mb)
4 - One click deploy
5 - One click backups
6 - Customer Service
So I'm paying $79 a month for a 2gb server on Linode. Their dashboard is really nice, the ability to deploy a server with a few clicks is awesome. The ability to resize on the fly is mandatory for my system. Their automated backup system is top notch. Overall I'm a happy customer. I wouldn't go to a similarly priced competitor.
When I look at some of the cheaper competitors like Database By Design and Chicago VPS it appears like I can get at least twice if not up to four times the "server" stats that Linode offers for the same price.
That's a tall order.
If you consider the things I find important (listed above) do you think Linode is heads above these places? Is it worth 3x the price? Don't get me wrong, I'm a happy customer, but I don't like the feeling of paying more than I need to if there is equivalent offers for less money. I'm not interested in "going cheap" just as much as I'm not interested in "paying for someone's boat house"
I suppose it boils down to the sort of stuff you're doing with the server. If its relatively trivial like hosting a personal blog, chat server etc then you'll likely get away with the cheaper hosts. If hosting paying clients then I wouldn't settle for anything less than a Linode.
However, the higher end Linode plans loses value exponentially, say above the $60 mark. I don't see the point of a 2GB Linode when you can get a Hetzner 8GB quad core I7 server for less.
Tuxlite.com Complete LAMP and LNMP script for Debian and Ubuntu.
If you like linode, sure, stay with them. Are you paying too much for what you're getting? Maybe, maybe not. You said the ability to scale up and down at a single click is a "must". If it's a must, it's a must, but as you said, if you can get 4x the specs for the same price, maybe scaling up and down all the time isn't a "must" after all, if just leaving the specs high all the time costs the same.
This is the rarely discussed drawback of the cloud -- everyone says you save money by scaling up and down as needed, but when the base price is so much higher, you're just making more work for yourself, scaling your servers up and down all the time, without really saving any money. You pay dearly for that added flexibility.