RAID is not a replacement for a backup scheme. Ideally you would do RAID + backup. The advantage of RAID 1 is going to be that you can lose a disk and still retain all of your data; the disadvantage is that you only get to use 50% of your storage capacity, so if you have two 1 TB disks you'll get 1TB usable. Honestly, though, RAID is worth it. You WILL lose disks eventually . . . so prepare for it!
As for how many sites you can host, it all depends. If you're just doing shared and all of your clients have small, static websites, maybe 1000. Maybe 25 if your clients have busy, database driven sites, or even fewer . . . you get the picture.
Regarding your last question, I would say it's better to spread things out, personally. I would never put 1000 clients on one box unless I had a failover scheme in place. But you SHOULD NOT pick and choose between safeguards. Don't think RAID OR backup OR Spread clients out. Think all three at the same time if you want to provide a decent service.