Building my own virtual cloud?

  I spent the day at an academic conference on interdisciplinary computing. Oddly there wasn't much talk about computing. And since I am not immersed in the inner workings of academia, I didn't understand most of what was being talked about.
  So while I was not understanding, I daydreamed and came up with a question that I bet someone here knows the answer to.
  The question is this -- is this scenario economic?
  Say I want to run my own virtual cloud. Rent a server at a colo facility and install VMWare on it. Instead of paying Amazon or Rackspace for a few virtual servers, just create my own.
  Here's an idea of what kind of server you can get for $159 a month at Softlayer. I currently colo one server there, a very very old one. It runs great. I wonder how many virtual servers I could put on a modern machine. Any ideas??