Solving multi-tenancy issues is hard, but not impossible. I think it's a lot easier with live migration. If a box is giving you problems, just move the load to a new box while maintaining the same IP addressing.
With respect to cost, yes, AWS gets expensive at scale, but if you're at scale your servers are generally not your major cost center (it's usually payroll and licensing).
Of course, that design discipline is great wherever you are running....
Perfect should never be the enemy of the good.
Only in a world where resources are infinite does this work.
Its possible they get special treatment if they are big enough (nobody else's jobs on their physical machines ... or something like that).
And no, I don't think they're getting any real special treatment from Amazon since every single talk from a Netflix engineer points out the the cloud-specific issues they're solving in their infrastructure software.
You haven't been using Amazon long enough then.
Amazon is great for proof of concept. No upfront costs, extremely scalable, etc. Unfortunately, its expensive compared to physical hardware once you get to scale, and you may never solve underlying performance issues due to it being a shared tenant environment, even if you're a Netflix-sized customer.