Amazon's EC2 now named EC2 Block Store has persistent storage that should be much easier to use for EC2 instances.  Its appears to be as easy as using fstab to mount the EBS volume.  Pricing is along the same lines as all the other Amazon services, a pay as you go model, at a rate of $0.10 per allocated GB and $0.10 for 1 million I/O operations per volume.  They also allow you to make snapshots of a volume and store your snapshots on S3 and then start a new volume from a snapshot.  Looks like this is the missing piece for many people to make EC2 a valid option, I know a lack of easily usable persistence was preventing us from using it previously.

Now just need to do a cost analysis...