In my opinion, putting all of your eggs in one basket as you are describing isn't a great idea.  If I were to use micro instances for hosting I would certainly launch a dedicated instance for the mail server and then a second LAMP instance for everything else.  I would even go so far as to launch a third instance just for the databases depending on how many and how large they are.

You will be happier in the long run when you decide that you have to either do some maintenance or upgrade to a larger instance and you can migrate in stages instead of all at once.  You will also be happy that if someone hacks any of your servers, only a portion of your setup will be down instead of everything until you can get it fixed.  That doesn't make for happy customers.

But you won't know how well it works until you try... TBH I'm with Rick, especially with a Micro instance. Micro instances are good but one area where they struggle is CPU usage - if your appliance spends more than a few seconds at high CPU usage the CPU is throttled. If this happens then whatever your appliance was doing at the time grinds to an almost halt and will become unresponsive.

Unless you have a need for a ton of email addresses, personally I'd look at using a Google Apps account for email (free allows up to 10 email addresses mapped to your domain). Then assuming that you have low traffic you could run a WP blog or 2 probably... And at least you'll get emails no matter what....

If keeping costs down is a main concern, I would go with a reserved small instance then.  There's nothing to say you can't break it up later if necessary.  I am running Piwik on a micro instance just so I can try it out and I am also running BIND on that instance as a third DNS server for redundancy.  Even that concerns me, but so far so good.

In my opinion, micro instances are a good way to test out an appliance or to not pay an arm and a leg while initially setting up your server if it's going to take a bit of time to get everything in place.  When it comes time to go live though, I would run tklbam and then restore that backup to at least a small instance for production use.  If you plan on being up at least a year reserve the instance and run with it.  :-)

I had a site on a shared hosting account begin to get bursts of 8-10,000 hits a day and it took down the whole page. Since then I have been using dedicated servers. You don't want that day to come only to find out the site is down. 

What are you currently using for hosting?  It's not uncommon for shared hosting servers to have 800, 1000 or more sites hosted on it. If you know the ip address of the server you can do a dns search that will list all hosted domains at that address.  Of course these are top of the line systems in best of breed data centers.  Probably comparable to the highest priced turnkey instance. Still, what can you expect for $2.99/mo?  The best thing about the TKL Hub is that you can pay pennies per hour to run your own server and do whatever you want with it compared to $100/mo or more for a dedicated plan anywhere else. Even a medium instance is cheaper than that I believe. 

My advice is to launch a micro instance, get everything setup the way you like it and then, when the sites are ready or when traffic picks up, take a snapshot and clone it to a larger instance. I am currently doing the same thing with a few micro servers that I launched in Ireland, Brazil and Australia. (Btw, launching servers in international datacenters is another excellent advantage of the TKL Hub.)

You can always use the free email hosting that comes with your domain.  You would have the best of both worlds there. A separate micro instance web server and a mail server with web mail.  Thats assuming you registered through godaddy or someone similar.  That may require that you use their DNS servers so you would need an elastic ip that you can then setup your DNS A record with.  It's fairly easy to get working and I think you only get charged for elastic ip's if they are not associated with an active instance.

All in all, I think a micro instance would be more like a virtual dedicated setup and be way better than a shared hosting setup.

Type your URL in at this site and see how many other sites are hosted with yours. 

http://www.reverseip.us/

That's possible, but strangely one of my servers showed up as having zero hosted sites.  Hmmm.  

I think this was a glitch on HG side. Doesn't seem to be happening recently.