Since I've actually been in a situation very close to the one you're describing, hopefully my two cents will be worth something. About a year ago I had been having my site hosted on FortuneCity (my advice: don't). My site is pretty much just a reference guide for Windows programming, and it's still largely static content. Anyway, about a year ago I got an offer from a company that hosts a large site vaguely similar to mine.
After careful consideration, I accepted the offer. Generally, it's gone pretty well. The free hosting servers were notoriously unreliable and were a source of frequent problems. The servers that my benefactor provides are more reliable and have allowed me to do pretty much anything I want scripting wise. They also give me e-mail service off the server. In exchange, we split the banner ad revenue.
The benefits of this system are that there's no out-of-pocket expenses for me -- they were assuming all the risk financially. Also, since they ran another larger site, they were able to get a better deal on banner ad service than I would have alone (generally, the CPM they'll give you for an ad will increase with number of impressions). I had been doing research on paying for hosting, and I couldn't be sure of breaking even on the deal. And of course, I got more reliable web hosting and e-mail service than I had already had.
One concern of course is getting screwed on the deal. In my case, since I had been running the site for free anyway, I didn't stand to lose anything -- I still had the free web space and e-mail elsewhere anyway if they double-crossed me or the deal fell through. I made sure that they agreed to let me retain my copyright on the content, so they wouldn't be able to steal my work from me. I also made sure I maintained complete control over the content. (If it weren't for the fact that I mentioned on the site who I have a hosting deal with, there'd be no way to tell.) With those safeguards in place, I didn't have much to lose. (Of course I kept multiple backups of the content anyway, both for development purposes and as a fallback.)
Of course, my situation's a bit different than yours is. My site mainly was (and still is, essentially) a bunch of static content which I update. With dynamic, user-generated content, additions could be lost if the hoster decides to double-cross you or change the terms midway through. Also, I started it as a non-profit site, so losing profits wasn't much of a concern. (The worst-case is that they didn't pay me my share of the ad revenue, but since FortuneCity required me to put ads on the pages that I didn't make a cent off of, it wasn't a huge danger.) Potential loss of revenues may be a bigger concern for you. Also, since I'm just a poor college student, I didn't want to have to worry about finding hosting, paying the fees, etc. without any certainty I wouldn't be paying out of my own pocket regularly.
My recommendations? Don't be too quick to decline the offer, but be cautious anyways. By all means, make a written contract. Make sure it stipulates that you retain ownership of all your content. Make sure you agree to a peaceful means to end the agreement, and how much notice either side needs to give before ending the agreement. If your potential benefactor has given this deal to anybody else, ask that webmaster or site operator how the deal has been. See what problems they may have had. Also, in my case, the people making me the offer had been operating a site I had already known about and that was already well-established. In other words, they were no fly-by-night operation. And of course, make sure you'd have access to anything on the server that you'd need to use.
Ultimately, you need to decide if accepting the agreement is worth the risks if something goes wrong. Have a backup plan by all means in case things fall through or the deal turns sour. Decide if you would be better off paying for dedicated hosting instead of accepting this person's offer. And if there's no guarantee of any kind (as you mention in your article), stay away.
Hope this helps you make your decision. Regardless of what you decide, don't be hasty and be sure to explore your options.
Hey! Why aren't you all dead yet?! Oh, that's right, it's only Tuesday. -- Zorak