Still, everyone is at least entitled to an advanced notice from their host that they're getting shut down, to avoid any downtime.

In this case, it seemed like keeping the website offline was Rackspace's goal, not "refusing service", which is very lame.

Fully agreed. The only reason I would find that type of shut-off acceptable would be if Rackspace were getting DDOS'd to a point that was costing them significant expenses by way of bandwidth, manpower, or downtime credits to other customers. In such a case, shutting them off for causing these damages while violating Terms Of Services would definitely be warranted.