The biggest issue with large-scale cloud deployments, as I see it, is the ability to load balance and replicate effectively. Otherwise, it defeats the purpose of having the cloud. Let's say you could run around 4-5 VPS to add up to the same power as a single dedicated server - the price point makes them even on a month-to-month basis, but not if you include the costs of developing applications to work with it.
However, the cloud idea (having boxes on multiple ISPs) could allow for you to be fault tolerant and remove a single point of failure.
There are pros and cons either way, but it is an idea that may be worth exploring depending on the type of application.