I've never really tested the cloud computing thing, but it definitely sound like a perfect match for any MMOG especially if you are still in some kind of startup phase. In my oppinion most of the mid sized games are focused on a certain region and this automatically means that you will experience heavy load fluctuations over the day because most people sleep at night and so on :)
But nonetheless, you have to be careful if it's worthwile to switch from a dedicated server onto a cloud like Amazon's EC2. Especially for small games which are served by just one dedicated server it's likely, that switching to a cloud will raise your expenses in the beginning! If you plan to grow it might be a cool move but it should be considered carefully even if services like mosso.com etc are making it really easy to host on a cloud.
I have a question to those of you who have already moved over to EC2 or any other cloud: Do you have a single, dedicated server left? Or do you have moved anything to the cloud? And what is with the DB server? At least in EC2 when it crashes, it comes up freshly from it's image, all data that's not backuped is lost, how do you prevent such risks?
Thanks a lot,
Thorben