MSDE is a subset of SQL Server 2000. MSDE limitations are:
Database size limited to 2 GB
Simultaneous connections limited to 5 (connections, not users)
Not licensed to use Enterprise Manager
Otherwise, it is virtually the same. If you are developing for MSDE, you will have no problem hosting with SQL Server 2000.
Note that IT IS NOT ILLEGAL to host with MSDE; several Microsoft products/programs actually require or encourage the use of MSDE in a hosting environment. (Windows SharePoint Services includes MSDE and the minimum requirements for the Web Presence Provider program for database hosting can be met with MSDE.)
Of course, we use full SQL Server for our shared hosting services but we offer MSDE for clients that co-location or choose a dedicated server. For many applications, MSDE is fine and the licensing/costs are very advantageous (MSDE is FREE).
Voicegateway.com Web Services offers shared, dedicated, and now VIRTUAL MACHINE HOSTING for ASP.NET, ASP.NET 2.0 "SQL Server 2005, Windows SharePoint Services, & More..