I agree completely with the statements here that there is no need to separate sites into their own installs or databases, if you are managing or supporting all of the sites.  Since we take care of everything for our customers as the "host" account, and for the majority we even handle the site administrator functions, combined sites in one install makes perfect sense.  As stated in above replies, support is simplified, sharing of modules is easy to manage and control, and overall costs are greatly reduced.  

We do group sites into installs for some types of modules so that testing of upgrades is more straight forward and speedy for the majority, but that is really the only reason.  For example, there are separate installs for sites the use Catalook store since it is more complicated than modules used by the majority of sites, and takes more time for testing.   Separating a site from an install, or splitting an install is not at all difficult.

Also, multiple domains under one IIS website & application pool is especially useful with multiple sites that have low traffic volumes.  It works beautifully and saves on server resources, especially memory.  We use host headers to list the domains and the DNN alias takes care of the separation.  All sites within an install are "Parent" sites only.  For IIS logs, we use Smarter Stats which separates the domains again nicely for statistics reporting. 

We have not had any issues with this setup, being the full service operation. (we hold the end user's hand, and even enter their content for them many times).  If a customer wishes to have a separate install and database, that is their choice, but the support costs go up.