Hello onauc,
Well - the questions you have asked are EXTREMELY open ended - with no real answer available. However, I will try to provide you some things to think about:
1. pros and cons on re-selling hosting
Well - simply too many of these to list. I think you can figure this one out on your own
2. what catches (pitfalls) I should look-out for when purchasing hosting for reselling purpose
Biggest pitfall is making the right decision with respect to a provider. Getting customers in this business is difficult - especially when you are first starting out. Losing them because of bad service is downright deflating. I cannot stress this enough - DO NOT purchase the cheapest reseller packages you can find - you will be destined for problems and will more then likely lose many customers over this. Make sure you choose a provider that has clustered their resources, has a solid uptime record and most importantly, will be there for the long run.
3. what pitfalls I should look-out for when reselling webhosting to my customers
Again - see above. If you are on an unreliable service - the amount of time you will spend trying to save the customers you have vs spending your time getting new customers is enourmous. Believe me - saving $10 or $20 or $30 a month is not worth it. Choose the right provider from the start.
4. how much resources and what features I should make sure to get from my seller to resell to my buyers
5. what packages (how much webspaces and bandwidths) I should offer for sale at what prices
6. how I can influence you to buy hosting from me so you forget your existing hosts.
I have grouped these together for a reason - you are basically asking the same question in all 3 points above.
Let me be blunt - you CANNOT sell hosting on price and get anywhere. The market is saturated and there will always be many many people cheaper then you - although 90% of these companies will disappear within the year. If you are serious about entering this industry - find your value add - why should consumers buy from you vs someone else? Why should consumers pay you more then they will pay someone else? There needs to be value here - or you are wasting your time.
In your particular example - if you have an application you sell - ie) your proposed compression algorithm - then sell that WITH hosting packages - instant value add. Suddenly the price of hosting is irrelavent - as what you are reallin selling is your compression algorithm and a means for people to use it.
Consumers see value in this sort of thing - and rightfully so.
There's other ways to approach this - but, I'll put it this way - if you want to make $800/month simply reselling hosting - you're in for a long haul. If you want to make $800/month reselling a hosted solution - Id say you can accomplish this very quickly if you have the right solution and the ability to "pound the pavement" and make sales.
Andrew - http://www.cartikahosting.com
Business Grade, Clustered Application Hosting
Windows, Linux, Coldfusion, FreeBSD, MS Exchange and Dedicated Servers