You're on to something here. I imagine it was people with < 1GB plans that churned out the most (quit linode for a better offering) as soon as folks like Digital Ocean showed up. I should know, I was on a 768MB plan and as DO showed up with better pricing and more RAM I was gone. So I imagine that they've eliminated this plan to bring more stability to their recurring revenue, which makes sound business sense.
The interesting thing is that linode started out as a cheaper alternative to slicehost, so its ironic that they are now trying to differentiate themselves in much the same way slicehost did back then.
> Linode have been around since 2003. I think Slicehost was founded later than this
This is correct. I signed up with Linode in 2005 and there was no Slicehost then. I was moving from another VPS provider (Redwood Virtual) which had twice the resources for the same price as Linode but were really, really crummy (they don't even exist anymore). That experience really taught me the value of considering quality in addition to the price/feature ratio, which is why I'm not jumping ship to DigitalOcean. (I might if/when they establish a solid reputation, but no sooner.)