I agree about the automated scaling, but with VPS hosting you can usually have several hot spares to handle traffic spikes, and still spend less than something like AWS. Most good VPS hosts will let you create a private network between your VPSes. 1000x spikes aren't very common.
CDNs are pretty easy in general, especially if they support origin pull.
I don't like keeping all my eggs in one basket, so I use a few different providers.