I work at a hosting company, so I know a few things.

The cost of expensive disks (scsi) versus cheap (ide) is not really the issue.

Most customers host on a shared hosting environment. That is, there are perhaps 100s or even thousands of customers on the same computer / cluster. This means that disk space for all the customers needs to be available on that computer.

Now assume for simplicity, we are using cheap ide 100 G drives that cost $100. If a customer wants 100G, we could cover this expendature for roughly $100. However, a 2u rack mount computer can only hold 3 hard drives. So if 3 customers need this much space, now we need to buy a whole new server to house this disk space. This means the cost of a new computer, plus more rack space at the data center (not cheap).

Of course, we dont use $100 ide disks. And we need to backup up the data, and there is the labor of installing and maintaining the new hardware, etc.

Using Raid5 means that you basically could only get a little more than 1 such customer per server (using 3 x 70G scsi drivies)

disk space might be getting cheaper, but associated costs are not.