Offer hosting for website builder

Hello,

I want to build something like WEBS.com, WIX.com, Weebly.com type of offering. Two things are important for users:

a) As user creates an account, they choose to start from a design template. Using scripts it will get them a user-site-id@mywebbuilder.com and the corresponding sourcefiles/db are cloned from a template

b) Users may increase hosting package as they grow with a click, and it should be easy to provision the updated resources just for their site.

My question is:

1. Is Linode appropriate for that kind of business in general? I.e provide end-user hosting for ready-made sites, which they can upgrade in future?

2. Say if I had 1000 clients with basic usage only! Is is better to scale the hardware resources? Or rather scale the numbers of Linodes?

Many say Rackspace/Amazon is best to build this with, but I'm checking if anyone at Linode has done this as I have heart many good reviews from technical folks? Thanks a ton