Yes, you are right: if you need all those things you mention, than hetzner is not an alternative.
However most startups an small busnisses don't, and maybe never will. I mentioned Hetzner because it's the most known here, but there are many other similar providers.
I'm using several Strato root servers since almost 10 years and never had an incident so far, even if it's "low" availability.
RE: S3 – it scales any time and on demand. I can upload 2 TB starting now and don't have to order a server which may or may not be around on Monday (tomorrow). You could compare S3 to something like Rackspace Cloudfiles or Nirvanix. Your Hetzner argument makes little sense – not even as far as TCO is concerned.
Also, good luck recovering your servers and storage array on a public holiday in Bavaria. ;)