I think that most of the problem with IaaS vendors, EC2 in particular is that the IO throughput is absolute shit. I've never had a problem with the software I'm allowed to run on EC2, I've always had a problem with its horrible IO throughput.
There is also a lot of comfort in knowing everyone else is running the same kernel and there will be some difficulty in executing various exploits for the hypervisor.
CloudSigma are an IaaS provider who presumably take a different approach.
Overall I think it is a valid point for them to make, especially as it seems that a lot of these restrictions are vendor created.