You can run a small hotel easily off a 1 GB RAM VPS. If you have a higher budget 2 GB RAM would be perfect. And what you heard is wrong, it's probably faster to run everything off one box. You have full access and can configure everything to your liking. Personally, I'm running a vm my self off my dedicated server. It's been assigned 2 GB RAM and only uses 1 GB RAM with 250 online. On this I run Apache, MySQL and the emulator.
When you use a webhost you'll need to use .htaccess files as most hosts use the Apache web server.
There's many VPS companies out there. The trick is, is to never go with the cheap ones (as with anything really). I've had good experiences with:
http://vps.net
BuyVM - Affordable VPS hosting with a touch of insanity
https://www.xznetworks.com/
Never buy a VPS from these Habbo kids who think they can set up a VPS host. #1 tip.