Why do you want to host your own customers sites .... ?
There are many reasons to move your customers hosting operations under your management -- but making money is usually not one of them.
Better control of the technical environment
Increase customer affinity
Expands service offerings to be more comprehensive
These are some good reasons to expand your services into the hosting market.
In terms of the type of hosting, what do your customers expect in terms of support, security and reliability?
With your own server you gain control and responsibility. With a shared hosting account, you leave many of the hosting headaches to the service provider.
So the right decision is less about technology and more about your goals.
In terms of costs, a well managed dedicated server typical costs $400+/mo by the time you consider hardware, backup, monitoring and support costs.
Sure you can pick up servers for $79/mo but do you have the time or expertise to manage things properly?
I am amazed at how many web developers that bill out at $100+ an hour spend 3-4 hours per month dealing with recurring server issues.
Run the numbers and see what makes sense.
Also, I've seen many of our own web development customers fail at the hosting business because they simply don't charge a premium for their services. If you are providing an all-in-one stop for a business to get their web development, hosting and other IT services, there's value in simplifying things for them - you can charge more for this value.